Payment Periods in Europe - Euler Hermes

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Euler Hermes Economic Outlook n° 1182 | Special Dossier | Payment periods An outlook of lengthening payment periods… … driven by a worsened economic environment + 0.5 % - 1.5 % - 0.5 % - 1 % - 2 % - 2.5 % + 0.5 % + 1 % + 0 % + 1.5 % + 2.5 % + 0.5 % + 2 % 0 % Value 1: Change in payment periods from 2011 to 2012 Value 2: Change in payment periods from 2012 to 2013 Source: Euler Hermes ◾◾◾ Looking forward: widening disparities, major efforts to be made, too rapid and perhaps inopportune? Using the econometric relationship between changes in payment periods and the economic environment, we expect a lengthening of payment periods. This is without taking into account the potential positive effect of anticipations of the Directive coming into force. In the countries of Northern Europe, relations between businesses and banks allow banks to commit providing borrowers with the funds to pay suppliers within contractual deadlines. In France and Southern Europe, by contrast, a system of supplier credit applies, which makes meeting contractual deadlines more difficult. payment periods will continue to improve, dropping by 0.5% in the former. In Poland, they should shorten by 2%, in negative correlation with its 3% growth rate. ▶ Positive momentum in France (due to the LME); but in Belgium, by contrast, economic setbacks will be more determining. With growth forecast at 0.3% in France and 0.2% in Belgium – in both cases below their growth potential – the two countries will see a slight 0.5% increase in payment periods. In 2013, while B2B payment periods are likely to continue rising by a further 1% in France, these times should shorten by 1.5% in Belgium We may expect slightly less rigorous payment discipline and a certain degree of confidence among French businesses, possibly due to their use of credit insurance. ▶ Germany and Poland: small-scale reduction and nearly no contribution to the economic environment. Both countries have been rigorous, with payment periods – already shorter than required under the European Directive – and they are continuing their efforts. In 2012, both countries by our forecasts will enjoy growth – at 1% in Germany and 3% in Poland – and ▶ Southern European countries, hit hard by the crisis, will struggle to attain the targets. Payment periods in Spain, Portugal and Italy should increase in 2012. We forecast a natural growth in payment periods in these countries, with a 2.5% increase in Spain and a 2% increase in Italy, doing nothing to help them meet the European Directive. 10
Economic Outlook n° 1182 | Special Dossier | Payment periods Euler Hermes Cash flow pressures should increase. From 2007 to 2008, we have seen an evident intensification of cash flow tensions in Portugal and Italy, already at high levels. Increased cash flow tensions force businesses to find other sources of finance. By contrast, in Poland a nearly zero cash flow requirement (1 day) underlines tight cash flow management. Spain, for its part, has escaped the cash flow scissors effect suffered in other Southern European countries only thanks to supplier payment periods being nearly as long as client payment periods. Despite showing acceptable cash flow requirements, businesses in France and Belgium should pay close attention to cash flow management. In 2013, the prospects for growth are better than in 2012 and suggest a positive influence on B2B payment periods. However, this should be of limited scale in Southern European countries, necessitating major efforts there to meet the targets of the European Directive. The new European Directive should prove difficult to implement by 2013, especially in Southern European countries, and could in the short term impact on the number of insolvencies and weaken the industrial fabric, although in the long term it could have a beneficial effect for these same countries. ▣ Cash flow: Tension Indicator 30 25 20 Forecasts 15 Forecast of economic growth and insolvencies in 2013 10 Belgium Germany Spain Country Growth Insolvencies Germany Q +1% q -1% Poland Q +3% Q + 11% Belgium Q + 0.2% Q + 10% France Q +0.3% Q +4% Spain q - 1.8% Q + 20% Italy q - 1.8% Q + 24% Portugal q -3% Q + 29% 5 0 00 01 02 03 04 05 06 07 08 09 Sources: Euler Hermes calculations, BACH database 10 11 12 13 France Italy Poland Portugal Source: Euler Hermes Scale of the efforts to be made Change in client payment periods Change in supplier payment periods Days’ revenue 120 Forecast Days’ revenue 120 Forecast 100 Effort to be made 100 80 80 Effort to be made 60 60 40 20 Belgium Germany Spain France Italy Poland Portugal 40 20 Belgium Germany Spain France Italy Poland Portugal 0 00 01 02 03 04 05 06 07 08 09 10 Sources: Euler Hermes calculations, BACH database 11 12 13 EU Directive 0 00 01 02 03 04 05 06 07 08 09 10 Sources: Euler Hermes calculations, BACH database 11 12 13 EU Directive 11
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Payment Periods in Europe - Euler Hermes

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