Payment Periods in Europe - Euler Hermes

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Euler Hermes Economic Outlook n° 1182 | Special Dossier | Payment periods Contents n°1182 Special Dossier Payment periods Payment periods in Europe: wide gaps Economic Outlook n° 1182 | Special Dossier | Payment periods Editorial page 3 page 4 > Overview – The increase in payment periods poses a major risk to European recovery page 4 page 8 > First Focus point – A three-speed Europe page 8 page 12 > Second Focus point – What determines payment periods in different sectors? page 12 • Automobiles and automotive components >The problem for subcontractors page 14 • Air transport >An instrument of globalisation but marked by regional differences page 18 • Chemicals >Supplying industries and supporting the industrial fabric via client credit page 20 • Pharmaceuticals >No cash flow problems page 22 • IT services > Constrained by their clientele page 24 • Aeronautic components >Stability in payment periods – sign of a healthy sector page 25 • Construction >The sector with the greatest disparities page 26 • Four determinants to note page 28 • Comparison Germany-France page 28 Annexes page 29 • Annex I > Law on the Modernisation of the Economy (LME) and sector round tables in France page 29 • Annex II > Payment defaults in Italy page 30 • Annex III > Detailed data, by country page 31 • Annex IV > Detailed data, by sector page 32 Subsidiaries page 33 Economic Outlook series page 35 Le Bulletin Économique du Groupe Euler Hermes is issued ten times a year by the Economic research department of Euler Hermes. It is also available on subscription for other businesses and organisations. Reproduction is authorised, so long as mention of source is made. o Publication Director and Chief Economist: Ludovic Subran • Study coordinated by: Virginie Reboul (Economist) • Macroeconomic Research: Maxime Lemerle (Manager), Mahamoud Islam (Economist) • Global Sector Research: Yann Lacroix (Manager), Bruno Goutard, Marc Livinec, Didier Moizo (Sector Economists) • Country risk Research: David Atkinson (Manager), Andrew Atkinson, Manfred Stamer (Economists) • Have also contributed to this publication: Romeo Grill (Economist for Germany), Dan North (Economist for the USA), Christian Péchard (Infocenter Studies Manager), Andrea Pignagnoli (Economist) • Graphic Design: Claire Mabille • Editors: Martine Benhadj • Support: Anne-Marie Bégoc, Valérie Poulain • Translation: Charles Prager • For further information, contact: the Economic Research Department of Euler Hermes at 1, place des Saisons 92 048 Paris La Défense Cedex – Tel.: +33 (0) 1 84 11 53 77 > Euler Hermes is a limited company with a Directoire and Supervisory Board, with a capital of 14,451,032.64 euros. • Photoengraving: Evreux Compo, Evreux, France – Permit April 2012—Bull 1176; ISSN 1 162 – 2 881 o 31 May 2012 2
Economic Outlook N° 1182 | Special Dossier | Payment periods Euler Hermes Editorial The harmonisation of payment periods in Europe: a necessary evil? Although the notion of economic convergence seems crucial to the future of the European Monetary Union, it is threatened by the upheavals being undergone. The growing gaps in growth, public deficits and current account balances – both in scale and intensity – demonstrate that the differences between the heart of the Eurozone and the periphery are here to stay. Creating a common economic policy that benefits from this heterogeneity and that ultimately transcends it is an essential task, especially to allay fears over the Eurozone’s very future. The toolbox – of which the European Financial Stability Facility (EFSF), the European Stability Mechanism (ESM) and the European Investment Bank (EIB) are parts – strengthens institutional convergence, but it does not solve the problem of the efficient specialisation of economies that one would expect. The economic debate, for its part, remains marked by this indispensable convergence, crystallized by the furious speed required to return to balanced budgets for 2012 and 2013. Making this adjustment is particularly hard for the countries of Southern Europe, hit by severe recessions. This study focuses on a less visible but equally important convergence: that of payment periods between businesses. By March 2013, under a European Directive, contractual payment periods in Europe must be set at a maximum of 60 days. Some countries are ready for this, such as France, while others, such as Germany, already show payment periods well below 60 days. By contrast, Italy, Spain and Portugal, as well as certain key economic sectors in some countries, such as construction and IT services, are far from the European target. On top of this is the deterioration in economic activity in Europe. This should further amplify these gaps by 2013. Will European SMEs, which create the growth of the Eurozone, suffer from an overly rapid convergence, one that is countercyclical and potentially damaging to their cash flows? When you focus in on the sector level, the differences between client and supplier payment periods are considerable and at times alarming. In economic policy terms, efforts to support and increase the competitiveness of the private sector remain little discussed, despite a marked rise in business insolvencies nearly everywhere in Europe. Discussions over sovereign debt occupy a great deal of attention, but they do not address the difficulties facing businesses. However, it is today that we will determine the health of Europe’s industrial fabric for the future. _Ludovic Subran 3
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