Payment periods in - Euler Hermes

eulerhermes

Payment periods in - Euler Hermes

no. 1182

Special ”Dossier”

Payment periods in Europe:

wide gaps

Euler Hermes Economic Research Department

Economic Outlook

www.eulerhermes.com | no. 1182


Euler Hermes

Contents

n°1182 Special Dossier

Payment periods

Payment periods in Europe: wide gaps

2

Economic Outlook n° 1182 | Special Dossier | Payment periods

Editorial

page 3

Subsidiaries

page 33

Economic Outlook n° 1182 | Special Dossier | Payment periods

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

Annexes

page 29

> 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

• 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

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


Economic Outlook N° 1182 | Special Dossier | Payment periods

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

Euler Hermes

3


Euler Hermes

Overview

The increase in payment periods

poses a major risk

to European recovery

4

1

Definitions

▶ Contractual payment period > the time period during

which payment should be made according to the provisions

agreed between the client and the supplier (stated in days).

▶ Effective payment period > the time period at the end of

which the payments due as agreed between the client and

the supplier are actually made (stated in days).

▶ Lateness of payment > the time difference between the

contractual payment period and effective payment period.

The sum of the average lateness of payment and the

contractual time yields the effective payment period (stated

in days).

▶ Days’revenue (DR) > unit consensually used to express

payment periods when they are calculated using business

balance sheet data, dividing the amount of client credits or

supplier debts by average daily revenue.

Economic Outlook n° 1182 | Special Dossier | Payment periods

As we near the March 2013 implementation of

the European Directive, B2B payment periods

are now more than ever a core concern. Cash

flow dynamics are always crucial for a business, and

this becomes especially the case at times of economic

crisis and more restricted access to bank or market

finance, during which even more rigorous management

of accounts receivable and payable is called for.

▶ Client payment period > the average time until collection

by the business of client payments, taking account of the

payment periods agreed by the business. The longer the

delay, the more the business’s cash flows suffer from a lack of

funds.

▶ Supplier payment period > the average time taken by a

business to pay suppliers, taking into account the time

periods agreed with the business. The shorter the payment

period, the more the business’s cash flow suffers from a lack

of funds due to rapid payment.

▶ Tension indicator >the difference between client

payment periods and supplier payment periods (stated in

days).

Source: Euler Hermes


Economic Outlook n° 1182 | Special Dossier | Payment periods Euler Hermes

The importance of payment periods

Order

Source: Euler Hermes

A microeconomic problem… … and an indicator of the business climate

Delivery

Issuing

of invoice

60 days maximum

Period defined by the European Directive

Date Invoice d’échéance

de due la facture date

Besides a sharp upturn in the volume of insolvencies,

the end-stage of business difficulties, the crisis and its

many secondary effects have brought a marked deterioration

in the quality of B2B payments in Europe.

There have been overall increases in the rate of losses

arising from bad debts, in late payments, and more

broadly in payment periods, while B2B credit is a major

mode of finance across all countries. The current economic

and financial climate, marked by a deteriorating

outlook and by increased uncertainty and greater volatility,

strengthens the need that much more to monitor

and manage the risks associated with the lengthening

of these payment periods.

Many data sources exist for measuring and comparing

payment periods, as well as several studies to analyze

developments in inter-company payment. However,

their methodologies vary in terms of the nature of the

data they employ – either using quantitative data

(from national administrative databases, institutes or

surveys), and most often on only an annual basis, or

infra-annually, or – most often – using qualitative data

resulting from samples or surveys. The methodologies

also vary in terms of the scope of their studies, either

in terms of business size (SMEs or large companies) or

time-scope under study (payment periods or only late

payments). As a result, the comparative, studies examine

fields of varying scope, with no effective harmonising

methodology. Also, these analyses are

mostly descriptive, covering sectoral matters, and

generally do not offer any quantitative forecast. Lastly,

we should note that, by its nature, it remains hard to

summarise the payment period situation for a country

or even a sector, given the wide amplitude of payment

periods from one business to another.

◾◾◾

> An aggregate calculated for a country or sector that:

– gauges the fluidity of exchanges between

a country’s businesses,

– is a measure of cash flow management vitality,

– has an impact on business climate attractiveness.

2

Legal aspects

To put an end to the problem of late

payments, countries are mobilising.

European Union > European Directive 2011/7 of 16 February

will replace European Directive 2000/35 of 29 June. Member

States must make the changeover by 16 March at the latest. The

main measures of the Directive are:

> establishing a standard payment period of 30 days;

> setting a maximum payment period of 60 days in the absence

of any contractual stipulation setting another payment period

> introduction of penalties in the event of late payment, with

a unit indemnity of 40 euros interest charged on late payment

(reference rates plus 8%).

France > The French Law on the Modernisation of the Economy

(LME), France ▶ The French Law on the Modernisation

of the Economy (LME), introduced in 2009, imposes a maximum

payment period of 60 days, 45 days from the end of the

month beginning from date of issue of the invoice. 35 derogations

(sector agreements) have allowed businesses that otherwise

would have run into severe difficulties to benefit from more

flexible, gradual conditions. On 29 February, France's National

Assembly adopted the proposed bill concerning the simplification

of legislation, which, in particular, provides for the extension of

dispensatory payment periods.

Spain > Spain’s law 15/2010 of July 2010 established a timetable

of gradual application of these new payment periods:

> from its entry into force until 31 December, payment periods

were limited to 85 days

> from 1 January 2012 to 31 December, a maximum payment

period of 75 days

> from 1 January, payment periods limited to 60 days

Sources: Ministries of Economy, Finance and Foreign Trade, Official Journal

of the European Union

5


Euler Hermes

6

6%

4%

2%

0

-2%

-4%

◾◾◾

Focus on France

The legal framework and the effect of the LME

Introduction

of the LME

-6%

98 00 02 04 06 08 10 12

Source: Euler Hermes

From the literature on the subject and from past

experience, notably during the crisis of winter 2008-

2009 and the emergence from crisis that followed,

three key facts on payment periods in Europe can be

noted:

▶ An economic recovery does not

necessarily imply a shortening in payment

periods.

The crisis has generally necessitated tighter control

over cash flows, with reductions in investment and

optimisation of inventories. However, these have not

been enough to offset the exceptional scale of the

downturn, which has brought increased payment

periods in every country in our study, apart from one

notable exception – France, partly because of legal

changes over this period. At the same time, the rise

in late payments and payment defaults has also

increased perceptions of a lower likelihood of being

paid on time. Conversely, recovery in the economy

does not automatically signify a trend of reduced

payment periods. In the very short term, the recovery

phase of activity can initially be accompanied by an

increase in exposure (accounts receivable and payable)

at a faster pace than turnover, which counters

the shortening in payment periods, and it then

requires the growth in activity to accelerate more

than proportionally: France saw no reduction in payment

periods in 2010, on annual average. Growth of

0.1%, in our study, implies a change in client payment

periods of between -1.3% and +0.5%.

Growth (left axis)

Client payment periods (left axis)

Inverse growth in insolvencies (right axis)

-20%

-15%

-10%

-5%

0

-5%

-10%

-15%

-20%

Economic Outlook n° 1182 | Special Dossier | Payment periods

▶ A rise in late payments increases

insolvencies more than proportionally,

but the obverse is generally not shown.

In 2011, in countries such as Germany and France,

the downtrend in late payment periods was accompanied

at the same time by a fall in insolvencies.

However in Belgium and even more in The United

Kingdom, this same trend failed to prevent a rise in

insolvencies. In practice, a relationship between late

payment periods and insolvencies is seen much

more during periods of increasing late payment

periods, which are propitious to a sharp rise in insolvencies.

▶ A favourable legal framework brings

increased attractiveness.

The European Directive will prove an effort for some

countries, for instance in Southern Europe, which

must gradually come into line with the new standards.

However, the convergence should in the long

run also allow them to generally reduce their payment

risk profiles (all other things being equal), and,

in so doing, increase their attractiveness as international

trading partners. France regulates payment

periods through its Law on the Modernisation of the

Economy (LME), introduced in 2009 (see ‘Legal

aspects’p. 5). The French government would like to

further reduce payment periods to 30 days for SMEs

and VSEs. Clearly anticipating the coming European

Directive, Spain’s law of July 2010 (see ‘Legal

aspects’p. 5) sets out a timetable for the gradual

application of these payment periods.

▶ The case of France

It is notably thanks to the LME and the

anticipation of its coming into force that

French businesses improved payment

periods and their volatility, an important

point to the extent that they use four

times as much inter-business credit

than bank credit (at around 400 billion

and 100 billion euros respectively), with

accounts payable accounting for

between 25% and 30% of the total

balance sheet of French businesses.

In 2009 payment periods fell by 3% and

insolvencies rose by 12% (against +15%

in 2008).


Economic Outlook n° 1182 | Special Dossier | Payment periods Euler Hermes

The aim of this study is to provide a comparative

analysis between countries (our first focus point)

and between sectors (second focus point) for client

and for supplier payment periods in Europe. The

major findings of our study are summarised below:

1The slowing of efforts seen starting in

2009 confirms the existence of three

dynamics in at work in Europe.

In this initial analysis, using the BACH database (a

European database on non-financial firms issued by

the Bank of France), we studied the course of payment

periods for several European countries over the period

2000-2010 (available balance sheets). We next offer

a prospective view of payment periods for 2012-2013

using Euler Hermes data, which will highlight the

magnitude of the efforts that need to be made. The

indicators of change and of cash flow tensions generated

put the accent on the changes and the trends

in payment behaviour more than on the length of payment

periods, and best reflect the risks of worsening

cash flows that are already under pressure.

> There is a clear disparity between the countries of

Northern and Southern Europe that risks widening

over the very short term (2012), in the current economic

environment, and this will mean greater

efforts to be made, especially for countries in

Southern Europe.

The gaps by country. We can distinguish in fact ‘three

Europes’: Germany and Poland, both of whom show

payment periods shorter than the 60 days set out in

the European Directive and displaying very low cash

flow tension indicators; Belgium and France with payment

periods close to 60 days; and Spain, Italy and

Portugal, all of which saw significant increases in payment

periods in 2009 and will have to make considerable

efforts to meet the 60-day standard.

> The outlook for 2012 is for an accentuation of the

gaps between countries and therefore of the efforts

to be made.

In 2012, payment periods should mirror economic

developments. With an outlook for positive growth,

payment periods for businesses in Poland and

Germany should normally shorten by an average of 2%

and 0.5% respectively. For France and Belgium, with

growth forecast to be below potential, payment

periods will increase by 0.5%. By contrast, the countries

most in difficulty, such as Spain, Italy and Portugal,

should see an increase in payment periods, taking

them further away from the 60-day target before

16 March.

> In 2013, a general, but limited, improvement in

payment periods in Europe.

The outlook for positive growth in 2013 will allow an

automatic improvement in payment period practices,

but this will not be enough to meet the target.

2 European sectors: 4 groups.

In a second analysis, we employ the Euler Hermes

database for a closer examination of European business

sectors, over a greater number of countries. We

focus on eight key sectors.

> Gaps between sectors will persist, driven by the

difficult economic situation and by still unequal

negotiating strengths.

There is a clear gap between sectors within a given

country and between countries in a given sector. The

ranking of sectors (by length of payment periods)

remain fairly similar from country to country. However,

in Southern Europe, the sectoral differences are four to

five times greater than in Northern Europe. Our eight

sectors break down into four groups: (1) air transport

and automobiles, with concentrated suppliers and

clients who pay quickly; (2) pharmaceuticals, chemicals

and automotive components, with average payment

periods since they are widely present in the economy,

and aeronautic component suppliers; (3) IT

services, where unequal bargaining power is the rule;

and (4) construction, with domestically-based suppliers

and clients. ▣

▶ Areas of analysis

> For the first analysis:

Countries: Germany, Belgium, Spain, France,

Poland, Italy and Portugal

All sizes of businesses

Period: 2000-2010

> For the second analysis:

Countries: Germany, Belgium, Spain, France,

Italy, United Kingdom, United States, Denmark,

Norway, and Sweden.

All sizes of businesses

Period: 2006-2010

Business sectors

Sector Division NACE Code 1

Automobiles 34 34.1 to 34.3

Automotive components - 28.4

Chemicals - 4.1, 24.2, 24.3, 24.5, 24.6, 24.7

Pharmaceuticals - 24.4

Air transport 62 62.1 and 62.2

Aeronautic components - 35.3

Construction - 45.2 and 45.4

IT services 72 72.1 to 72.6

7


Euler Hermes

First

Focus point

A three-speed Europe

8

Diverging developments in

the face of the economic climate

and the European Directive

This analysis highlights clear differences in

payment behaviour that comes as no revelation,

given the warning sounded in June 2000 with the

initial publication by the European Commission of

its Directive to combat late B2B payments.

However, with the targets not being met, on

16 February the Commission proposed a new

European Directive to allow long-term genuine

harmonisation within the EU. By 16 March 2013

this Directive has to be enter into law in all Member

States. Our following account of 2000-2010 and

our forecasts thus do not capture the legislative

impact in Spain (July 2010) and in the European

Union (March 2013).

Looking forward on the basis of macroeconomic

forecasts suggests only a weak convergence by

2013 (the target date of the European Directive

being 16 March), after an intervening increase in

payment period gaps in 2012 due primarily to the

weakness in the economy.

Economic Outlook n° 1182 | Special Dossier | Payment periods

▶ Sectoral gaps 4 to 5 times bigger in

Southern Europe than in Northern

Europe.

> Italy and Spain show large disparities

between sectors: with a national average

of 79 days for client payment periods,

Spain has payment periods ranging

between 174 days in the construction

sector to only 48 days in the automotive

sector, a difference of 126 days.

> German businesses posted average

client payment periods of 24 days in 2010,

with small variation (31 days), depending

on the sector.


Economic Outlook n° 1182 | Special Dossier | Payment periods Euler Hermes

At the end of 2010, on the eve of the

European Directive coming into force,

payment periods in different countries

were highly disparate, both in duration

and in trend, and particularly worse in

countries in Southern Europe.

▶ Germany and Poland already largely within the

standards

We see Germany and Poland already well below the

60-day standard set by the European Directive. The

two countries are distinguished by their strict

enforcement of late payment penalties. They show a

negative change indicator, reflecting a steady

improvement in payment behaviour. At 24

days’revenue on average in 2010, client payment

periods for German businesses fell by 21% between

2000 and 2010. Poland showed average payment

periods of 45 days’revenue in 2010, the same as in

2005.

▶ France and Belgium in the middle

Belgium and France neared the 60-day standard over

the decade. After falling by 10% since 2000, the time,

client payment periods in France stood at 61 days in

2010. This was largely due to anticipation of the 60day

maximum LME standard and its implementation.

Source: Euler Hermes

Amplitude*

150

120

90

60

30

The relatively high level of Belgium’s cash flow tension

indicator means that businesses there must pay

special attention to cash flow management.

We can see that the indicators of change in payment

terms in France were the only improvements in 2009.

Initially fairly close to that in Southern Europe, French

payment behaviour has approached that of Northern

Europe, thanks notably to the implementation of the

LME and also that to the importance of its trade with

Germany, where payment periods are short.

The levels of payment periods in France and Belgium

enable them to anticipate the implementation of the

European Directive with a certain vigilant calm.

▶ Southern Europe at the back

With longer contractual payment periods, Spain

introduced its 10 July 2010 law to gradually reduce

payment periods to conform to the European

Directive by 1 January. However, like Portugal and

Italy, countries in Southern Europe are suffering in

the economic climate and display payment periods

well above the norm, rising to between 80 and 100

days since 2009. At 116 days’turnover, payment

periods in Italy are the longest of these.

◾◾◾

The average payment period masks major differences between countries

SE DE

GB

NO

DK

0

20 50 80 110

Length of payment periods

FR

BE

* The difference between the sector posting the longest payment periods in the country and the sector with the shortest payment periods in the country.

Panel of sectors: automobiles, automotive components, pharmaceuticals, chemicals, air transport, aeronautic components, construction and IT services.

IT

ES

9


Euler Hermes

10

An outlook of lengthening payment periods

+ 0 %

+ 1.5 %

◾◾◾

+ 2.5 %

+ 0.5 %

+ 0.5 %

- 1.5 %

+ 0.5 %

+ 1 %

- 0.5 %

- 1 %

+ 2 %

0 %

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.

▶ 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

- 2 %

- 2.5 %

Economic Outlook n° 1182 | Special Dossier | Payment periods

… driven by a worsened economic environment

Value 1: Change in payment periods from 2011 to 2012

Value 2: Change in payment periods from 2012 to 2013 Source: Euler Hermes

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.

▶ 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.


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.

Forecast

of economic growth and insolvencies in 2013

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%

Source: Euler Hermes

Scale of the efforts to be made

Change in client payment periods

Days’ revenue

120

100

80

60

40

20

0

00 01 02 03 04 05 06 07 08 09 10

Sources: Euler Hermes calculations, BACH database

Forecast

11

Effort to be made

12

13

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. ▣

Belgium

Germany

Spain

France

Italy

Poland

Portugal

EU Directive

Cash flow: Tension Indicator

30

25

20

15

10

5

0

00

01

02

03

04

05

06

07

08

Sources: Euler Hermes calculations, BACH database

Change in supplier payment periods

Days’ revenue

120

100

80

60

40

20

09

0

00 01 02 03 04 05 06 07 08 09 10

Sources: Euler Hermes calculations, BACH database

10

11

Forecasts

11

Forecast

12

13

12

13

Effort to be made

Belgium

Germany

Spain

France

Italy

Poland

Portugal

EU Directive

Belgium

Germany

Spain

France

Italy

Poland

Portugal

11


Euler Hermes Economic Outlook n° 1182 | Special Dossier | Payment periods

Second

Focus point

Amplitude**

150

120

90

60

30

Source: Euler Hermes

12

What determines

payment periods

in the different sectors?

A fairly marked axis of sector internationalisation

Group 1

Air transport

Automobiles

Pharmaceuticals

Aeronautic

components

Automotive e

components ts t

Chemicals

Construction

Construction

Group 2 Group 3

**

IT IT services services

0

10 40 80 100

Length of payment periods

Group 4

* The difference between the country posting the longest payment periods for the sector and the country with the shortest

payment periods for the sector.

Panel of countries: Germany, Belgium, Spain, France, Italy, United Kingdom, Sweden, Denmark and Norway

** Excluding Spain

The national data studied in the first part of this

study does reflect the overall trends in a country,

but not the differences in the particular situations

related, for example, to business size or business

sector.

▶ Unequal bargaining power is a well-know fact

of life for SMEs dealing with very large enterprises,

and it is a structural disadvantage for them.

Major enterprises use their bargaining power,

weakening SMES, in order to win shorter client

payment periods and longer supplier payment

periods. This becomes more acute during periods

of crisis, during which room for manoeuvre

(access to finance) is more greatly reduced for the

smallest firms.

▶ The sector of activity effect is by contrast less

well known, but the disparities are great and are

intrinsically linked to the very nature of the activity

of businesses in the sector, due either to the sales

cycle (e.g., toys and chocolate), the production

cycle (longer in public works, shorter in foods),

or to the sector’s positioning (the absence of client

payment periods in major retail distributors).

This second part of our study will highlight other

sectors that also show these disparities.


Economic Outlook n° 1182 | Special Dossier | Payment periods Euler Hermes

The longest payment periods are seen in nearly

all countries in the construction and IT services

sectors. The automotive sector in most countries

has the least need of B2B credit. In Spain and France,

there is a difference of around 60 days between the

automotive sector and IT services, while the difference

is 65 days in Italy, only 30 days in Germany, and 20 days

in the United Kingdom. Over the period we examine,

we see a general convergence between payment

periods, limiting cash flow requirements.

We can distinguish four groups of sectors that present

payment periods that are similar in level and

amplitude.

Group 1

▶ Among automakers, we see a relative convergence

between client payment periods and supplier

payment periods, generating some cash flow surpluses,

with the prize going to Italy, which is converging

towards the other countries studied with client

payment periods at 37 days, but which shows record

supplier payment periods at 75 days.

▶ In air transport, payment periods are overall well

respected. While these have been cut by 18% in Italy,

they have however exploded in Spain, lengthening by

52%. For the other countries, payment periods generally

are between 20 and 40 days.

Group 2

▶ In France, sector round tables have helped subcontractors

to even out client and supplier payment

periods. These have shortened by 21%, to 54 days for

client payment periods and 53 days for supplier payment

periods. In the United Kingdom, however, while

supplier payment periods are down by 30% to 41 days,

client payment periods have dropped by only 12% to

68 days, generating a heavy cash flow requirement of

26 days. Germany continues to show rapid payments,

with client payment periods of 36 days and supplier

payment periods of 24 days. Italy for its part has the slowest

payments, with 111 days for client payment

periods and 96 days for supplier payments. Roughly

speaking, payment periods in Italy are twice as long

as in France and three times as long as in Germany!

▶ With global suppliers, the chemicals and pharmaceuticals

sectors show a limited difference in payment

periods. The chemicals sector made great

efforts after the abrupt slump in activity of 2008-2009,

achieving average client payment periods of 65 days

in 2010. Particularly great efforts were made in Spain,

where businesses have cut payment periods by 30%

since 2006. Our study of the sector also shows big differences:

Italy and Spain allow long client payment

periods, at 93 days and 67 days respectively, while they

pay their suppliers at 63 days and 46 days respectively,

creating significant cash flow requirements.

This becomes even worse in the pharmaceutical sector,

in both cases with cash flow requirements at 50 days.

Large cash flow needs are also generated in Germany,

with client payment periods of 46 days, which seem

long given that supplier payment periods are 29 days. In

the other countries in our study, we see a relative

convergence of client and supplier payment periods

within reasonable limits from 30 days to less than 60

days.

▶ In the aeronautics components sector, payment

periods are generally steady at between 20 and 60

days, with the notable exception of Spain where they

are unusually long.

Group 3

▶ In IT services, key clients impose longer payment

periods on suppliers in the sector, which shows fairly

long payment periods generally, particularly in client

payment periods, which are nearly 50 days in Germany

and the United Kingdom, 95 days in France, 101 days in

Italy and 107 days in Spain. The long client payment

periods and the far shorter supplier payment periods

(generally between 20 and 60 days), which are falling

apart from in France (+3% to 51 days) and in Spain

(+14% to 61 days) generates significant cash flow needs

within the sector and creates genuine financial fragility.

Group 4

▶ The highly locally based construction sector sees

payment periods lengthen when the economic climate

worsens, making it the sector where we see the

biggest differences. A prime example is Spain, where

supplier payment periods have reacted a record 157

days (and where the sector has massively suffered). By

contrast, in the United Kingdom client payment periods

are 33 days. It must be noted that the convergence

toward similar payments in these countries will take a

great deal of time. ▣

13


Euler Hermes

14

Economic Outlook n° 1182 | Special Dossier | Payment periods

Automobiles and

automotive components:

the problem for subcontractors

Relations between subcontractors and their clients

have been difficult for a long time. Major

contractors enjoy unchallenged bargaining

strength, benefiting from their powerful positions

to the detriment of their subcontractors and

imposing very long payment periods.

We note that the automotive components sector in

France (number two in Europe, behind Germany)

accounts for more than 40% of subcontracting in

the country.

Acceptable payment periods in the

automotive sector.

This is the sector with the shortest client payment

periods (at 37 days on average), proof of the cooperation

between major contractors and subcontractors,

notably in Northern Europe. With the implementation

of industry round tables in France, the

sector is working to harmonise payment periods in

order to avoid harming subcontractors. A very good

example is automotive components, with supplier

payment periods of 53 days.

With supplier payment periods longer than client

payment periods, the automotive sector shows cash

flow surpluses of varying sizes, depending on the

country. However the countries where these surpluses

are the biggest are those where supplier payment

periods are much longer than average.

We can distinguish two different groups of countries

in the auto sector.

▶ The good students of Northern Europe.

At the top of the class are Germany and the United

Kingdom, with client payment periods of 22 and 31

days’revenue respectively, and supplier payment

periods of 34 days in both cases. The cash flow surpluses

in 2010 were the equivalent of 13 days’revenue

in Germany and 3 days’revenue in The United

Kingdom.

In France there was a sharp fall in payment periods in

2007, followed by very sharp fall in 2008, when client

payment periods dropped to 32 days and supplier

payment periods fell to 41 days, in anticipation of the

implementation of LME.

However, 2009 saw a clear lengthening in payment

periods, with client payment periods increasing by

50%. This was a response to the crisis by automakers

to support their concessionaires, the latter heavily

burdened with stocks of unsold vehicles.

In 2010, payment periods shortened again, dropping

to 41 days for client payment periods and 49 days for

supplier payment periods, thanks to good cash flow

management, showing an 8-day surplus.

▶ The countries in Southern Europe as well as

Belgium are drawing on supplier credit.

The countries in Southern Europe as well as Belgium

are drawing on supplier credit to ensure a positive

cash flow to offset their weak cash flows or low shareholders’equity.

Italy shows a significant cash flow surplus, generated

by very long supplier payment periods (at 75 days,

more than twice as long as in Germany). At the same

time, client payment periods there are 37 days, within

the European average, generating a very large positive

cash flow for Italian automakers.

The European Directive, whose aim is to reduce and

control payment periods (to a maximum of 60 days)

will therefore be hard to implement in Italy in this

sector.

◾◾◾


Economic Outlook n° 1182 | Special Dossier | Payment periods Euler Hermes

Client payment periods: automobiles

Client payment periods in days’ revenue, 2010

Supplier payment periods: automobiles

Supplier payment periods in days’ revenue, 2010

50

40

30

20

10

0

-10

-20

-30

-40

60

50

40

30

20

10

0

100

2007

US

42

Indicator of change in client payment periods: automobiles

Source: Euler Hermes

2008

2009

SE

19

ES

48

2010

NO

45 IT

37 BEL

41

-110% -60% -10% 0% 10%

40% 60%

90

80

70

60

50

40

30

20

US

79 IT

75

FR

50

10

Change

0

-100% -50% 0% 50% 100%

Source: Euler Hermes

Client and supplier payment period gap: automobiles

Italy

Belgium

Spain

France

United Kingdom

Germany

-19

-19

-15

-3

-5

-25 20 -15 -10 -5 0 5 10 15 20 25

Client payment period difference from average of 37 days

Supplier payment period difference from average of 53 days

Source: Euler Hermes

0

4

3

5

11

16

22

France

Germany

Spain

Italy

NO

47

United Kingdom

Belgium

FR

41

ES

56

SE

37

DK

40

DE

21

BE

69

GB

34

DK

45

Cash flow Tension Indicator: automobiles

20

10

0

-10

-20

-30

-40

-50

DE

34

2006

GB

31

Source: Euler Hermes

Change

2007

2008

2009

2010

France

Germany

Spain

Italy

United Kingdom

Belgium

15


Euler Hermes

16

◾◾◾

Automotive component makers

and SMEs in the face of the large

automakers: what negotiating

power do subcontractors have?

▶ The scissors effect between client payment

periods and supplier payment periods, with subcontractors

coming out the losers, is a direct result of the

power of automakers over their subcontractor suppliers.

In France, given the many problems encountered by

subcontractors, measures were adopted through a

code of good practice of client/supplier relations for

subcontracting in the auto sector (see Annex I).

▶ For the auto components industry in France, there

has been a clear improvement in payment periods.

Indeed, client payment periods in the industry had

been rising consistently after 2000, to 110 days in

2004 (source: Euler Hermes).

The application of the code of good practice, combined

with the introduction of the LME, obliged automakers

to move to payment periods compatible with

supplier payment periods. We thus saw a proportional

contraction in payment periods in 2010, to 54

days for client payment periods and to 53 days for

supplier payment periods, helping subcontractors to

maintain low cash flow requirements.

In Germany, while payment periods are the shortest,

the cash flow requirements are however higher than

in France.

▶ In Spain and in the United Kingdom, there is a scissors

effect between client payment periods (83 days

and 68 days respectively) and supplier payment

periods (52 days and 41 days respectively), resulting

Economic Outlook n° 1182 | Special Dossier | Payment periods

in a significant increase in working capital requirements.

▶ In Italy, the cash flow requirements are 14 days,

with the longest client payment periods in Europe

(110 days, twice as long as in France and three times

longer than in Germany), offsetting once again very

long supplier payment periods, at 96 days’revenue.

Italy has not implemented a code of good practice

that could, as in France, considerably improve relations

between major contractors and subcontractors.

We note in the case of Italy an evident financial fragility

when it comes to implementing the new

European Directive on payment periods.

With its highly structured business sectors, Germany

has no need to implement codes of good practice.

▶ Cyclical factors: for major contractors, purchasing

operations should, with recovery, bring value added,

as subcontractors should produce equivalent or

more innovative quality at a lower cost; extreme

concentration among suppliers makes negotiations

difficult or even simply unlikely to bear fruit.

▶ Structural factors: with client payment periods

down by half in 2010 to 54 days’revenue, the auto

components industry in France has been one of the

major beneficiaries of the June 2006 signature of the

code of good practice.

In order to adapt to the new European Directive

coming into force in March 2013, Italy will have to

make the greatest efforts to shorten payment

periods, and this will not only be a real challenge, but

also will pose risks to business cash flows. ▣


Economic Outlook n° 1182 | Special Dossier | Payment periods Euler Hermes

Client payment periods: automotive components

Client payment periods in days’ revenue, 2010

100

Supplier payment periods in days’ revenue, 2010

90

80

70

60

50

40

30

20

10

0

GB

68

ES

83

SE

51

-150% -100% -50% 0% 50% 100%

Supplier payment periods: automotive components

120

100

80

60

40

20

0

GB

41

IT

96

FR

53

53

-100% -50% 0% 50% 100%

Source: Euler Hermes

Indicator of change in client payment periods:

automotive components

120

100

80

60

40

20

0

-20

-40

-60

NO

27

IT

111

ES

52

France

Spain

Italy

SE

39

Germany

United Kingdom

Belgium

-80

2007

2008

2009

2010

-20

2006 2007

Source: Euler Hermes Source: Euler Hermes

Client and supplier payment period gap:

automotive components

Italy

Spain

Belgium

United Kingdom

France

-28

Germany -34

-40 -30 -20 -10 0 10 20 30 40 50

Client payment period difference from average of 37 days

Client payment period difference from average of 37 days

Source: Euler Hermes

-16

-11

-1

-4

-3

-2

0

13

44

41

FR

54

BE

49

NO

40

DE

36

DE

36

60

50

40

30

20

10

0

-10

BE

67

DK

55

Change

DK

20

Change

Cash flow Tension Indicator:

automotive components

2008

2009

2010

France

Germany

Spain

Italy

United Kingdom

Belgium

17


Euler Hermes

18

Air transport: an instrument

of globalisation but marked

by regional differences

The air transport sector in our studies is comprised

of passenger transport and airfreight traffic.

From the data we can observe a number of sectoral

and regional characteristics.

Relatively short payment periods

in air transport compared to other

sectors.

▶ Two factors explain this feature, for example on

accounts receivable

> The passenger segment (78% of turnover in the

sector worldwide in 2011) is a B2C (business-toconsumer)

activity, and, due to a high proportion of

payments being made prior to travel, does not generate

significant accounts receivables in airline

accounts.

> Freight transport is subject to legally mandatory

payment periods of no more than 30 days (legal

constraints).

Also note that when carriers buy their aircraft, this is

carried out through medium to long-term financing

which allows them to make staged payments to aeronautics

constructors during the course of the production

of aircraft and then finalise payment once

the aircraft are delivered.

▶ Client payment periods structurally longer in

Europe (44 days’revenue) than in the United States

(22 days).

This is due to two fundamentally different economic

models. The major United States airlines, following

the difficulties encountered in the previous

decade, have clearly refocused on the passenger segment

and heavily reduced (or abandoned) related

activities, to the benefit of domestic or foreign specialist

operators. This nearly ‘pure player’strategy of

the United States companies, looking to concentrate

their resources to optimise their core business,

stands in contrast to the broader operational portfo-

Economic Outlook n° 1182 | Special Dossier | Payment periods

lios of their European counterparts. Of the latter, the

major players can, to varying degrees, shelter operations

as diverse as passenger traffic (a minimum

75% of turnover) as well as freight, maintenance (to

other airlines, in addition to their own fleets), catering

and IT services. This (highly relative) diversification

is part of a very different economic model –

one designed in order to, among other things, ‘saturate’the

use of their existing infrastructure (generally

very costly material assets) via diverse operations,

and in order to ensure good maintenance of sensitive

equipment, as well as to integrate activities that

are less cyclical and/or new avenues of profitability.

This partial orientation towards buoying B2B activities

automatically translates into lengthened payment

periods for the airlines’accounts receivable.

▶ During the 2008-2009 crisis, very substantial

fluctuations in accounts payable in the United

States (from 46 days in 2008 to 29 days in 2009);

less in Europe (from 35 days’revenue in 2009 to 38

days in 2009).

In a widespread context of falling activity, inherently

stemming from the world economic downturn, the

difference of magnitude in these two markets can be

explained by the concomitant variations in oil prices.

We have to remember the crucial impact of kerosene

prices at that time on the fortunes of airlines. Indeed,

fuel prices account for 30% to 35% of their operating

costs and thus a significant share of their accounts

payable. In face of the sector’s intrinsic exposure to

this factor, different choices were made on opposite

sides of the Atlantic. European carriers, for their part,

chose to use financial instruments to cover a generally

large part of their fuel purchases, which explains the

relative stability – or more correctly the more limited

scale – of the changes their accounts payable, despite

the turbulence in oil (and thus jet fuel) prices. In the

United States, by contrast, financial cover was

undertaken far less – or in cases not at all – being

deemed too expensive, and supplies were obtained

on spot markets, thus explaining the size of American

businesses’accounts payable following the course of

oil prices.


Economic Outlook n° 1182 | Special Dossier | Payment periods Euler Hermes

Client payment periods: air transport

60

Client payment periods in days’ revenue, 2010

Supplier payment periods in days’ revenue, 2010

80

70

60

50

40

30

20

10

0

IT

58

US

22

FR

44

DE

31

-30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 70%

Source: Euler Hermes

100

80

60

40

20

0

-20

-40

50

40

30

20

10

2007

ES

34

2008

IT

29

GB

17

0

Change

-50% -40% -30% -20% -10% 0% 10%

Supplier payment periods: air transport

Indicator of change in client payment periods: air transport

Source: Euler Hermes

2009

2010

Since then, the strategies have evolved, with

European companies generally having

reconsidered the extent and especially the duration

of their cover operations.

▶ A North-South divide in Europe.

The air transport sector reflects the characteristics

of a country’s domestic economic environment,

and hence is no exception to showing longer payment

periods in the south of Europe than in the

north. Thus, supplier payment periods are 25

days’revenue in the United Kingdom, 31 days in

Germany, 44 days in France, 58 days in Italy and 63

days in Spain. ▣

France

Germany

Spain

United States

United Kingdom

FR

44

DE

29

US

21

-10

-15

-20

-25

-30

GB

25

20

15

10

5

0

-5

2006

ES

62

2007

Change

Cash flow Tension Indicator: air transport

Source: Euler Hermes

2008

2009

2010

France

Germany

Spain

Italy

United States

United Kingdom

19


Euler Hermes

20

Economic Outlook n° 1182 | Special Dossier | Payment periods

Chemicals: supplying industries

and supporting the industrial fabric

via client credit

Between 2003 and 2005, the chemicals sector

went through the bottom of a cycle. It followed this

with large-scale restructuring among operators

that at times disrupted output flows. In 2009, the

sector suffered the impact of the abrupt economic

slowdown on its clientele, especially in the auto

and construction sectors. This gave way to the

appearance of input bottlenecks that in turn

brought an increase in payment periods in the

chemicals sectors of nearly every country.

A limited variation in payment

periods.

▶ Generally, one can say that enormous efforts were

made in the chemicals sector to manage cash flow

requirements. It was rather as if the violent downturn

in activity experienced in 2008-2009 convinced

operators to set right the way they were financing

their operational cycles in order to not (or no longer)

undergo the horrid consequences of suddenly

running out of cash.

The improvement in managing cash flow

requirements in the French chemicals sector has

been genuine. The sector’s cash flow requirements of

8 days’revenue seems the lowest in Europe after The

United Kingdom (3 days). With client payment

periods falling by 8% in 2008 and supplier payment

periods by 12%, the French chemical industry has

come out well, notwithstanding a slight increase in

payment periods in 2009. In 2010, payment periods

dropped below 60 days, with client payment periods

of 58.7 days’revenue and supplier payment periods at

50.9 days, or a total shrinkage of payment periods of

11% between 2006 and 2010.

▶ With shorter client and supplier payment periods

and lower cash flow requirements than in other

countries, the chemicals sector in the United Kingdom

shows once again a stable and effective management

of operating requirements. The income on cash of the

good performers in the sector is surely the result of a

strategy aimed at cementing the loyalty of their clients

and suppliers via long payment periods for their

customers and a determination to pay their suppliers

relatively quickly.

▶ We should note the singular efforts made by Spain

in its policy of cutting payment periods within its

chemicals sector. Compared to 2006, when client

payment periods were 95 days, Spanish businesses

have reduced the figure by 30%. Payment behaviour

in Belgium is close to that of France: reasonable

payment periods and good cash flow management.

Norway operates within the logic of an integrated

sector, well managing its payment periods and cash

flows. Indeed, despite a slight increase in payment

periods in 2009, the figures are still good, with client

payment periods of 40 days and supplier payment

periods of 31 days, and cash flow requirements of 9

days.

▶ Italy’s heavy cash flow deficits directly result from

its very long client payment periods, even despite

their shortening by 8% since 2006. At 93 days, these

are well beyond the limits of the European Directive

entering into force in March 2013.

▶ In the United States, the chemical industry pays its

suppliers an average of 40 days after invoices are

issued and gets paid by its clients with a payment

period on average equal to 61 days’revenue, resulting

in cash flow requirements of 20 days’revenue. ▣


Economic Outlook n° 1182 | Special Dossier | Payment periods Euler Hermes

Client payment periods: chemicals

Client payment periods in days’ revenue, 2010

Supplier payment periods: chemicals

Supplier payment periods in days’ revenue, 2010

20

15

10

5

0

-5

-10

-15

-20

80

70

60

50

40

30

20

80

70

60

50

40

30

20

10

Source: Euler Hermes

Indicateur Indicator of change in client payment periods: chemicals

2007

Source: Euler Hermes

ES

67

2008

2009

GB

30

FR

59

IT

93

2010

SE

32

DE

46

-40% -30% -20% -10% 0% 10% 20% 30% 40%

0

IT

63

SE

24

FR

51

ES

46

DE

29

-15% -10% -5% 0% 5% 10% 15% 20%

Client and supplier payment period gap: chemicals

Italy

Spain

Belgium

France

Germany

United Kingdom

Source: Euler Hermes

-18

-11

-9

-2

7

8

10

12

10

-30 -20 -10 0 10 20 30 40 50

18

Client payment period difference from average of 37 days

Supplier payment period difference from average of 53 days

25

44

NO

40

NO

31

France

Germany

Spain

Italy

BE

47

United States

Belgium

United Kingdom

Norway

DK

57

BE

58

GB

28

DK

29

Cash flow Tension Indicator: chemicals

50

40

30

20

10

0

US

61

2006

US

41

Source: Euler Hermes

2007

Change

Change

2008

2009

2010

France

Germany

Spain

Italy

United States

Belgium

United Kingdom

Norway

21


Euler Hermes

22

Pharmaceuticals:

no cash flow problems

Supplier payment periods seem generally shorter

than client payment periods in the

pharmaceuticals industry. Depending on the

country, however, we see an uneven picture in how

payment periods are developing. The

laboratories’advantage of enjoying comfortable

cash flow surpluses from their operations resides in

their ability to pay their suppliers more quickly and

thus benefit from financial discounts. This is more

profitable than placing their funds at low rates of

interest.

In France the rate of non-payment and insolvencies

in the chemicals sector overall is markedly higher

than in the pharmaceuticals segment.

Payment periods are well below 60 days in the

sector in the United Kingdom, Germany and

Denmark. The very short payments benefiting their

suppliers, which even occasion cash flow requirements

in Germany and Denmark, is a means of

consolidating their ties with their partners, allowing

them to benefit from, among other things, financial

discounts.

▶ By contrast, in Spain (-50), Italy (-50) and in the

United States (-55), the industry suffers from a harmful

scissors effect. The length of payment periods that

businesses grant their customers is very generous,

when it is not the result of (as in Spain) the financial

woes of their hospital clientele. Unlike in the United

States, however, Spain and Italy are not relaxing their

Economic Outlook n° 1182 | Special Dossier | Payment periods

efforts to attempt to shorten payment periods (-11%

and -6% since 2006 for client payment periods in

Spain and Italy respectively, compared to +49% in the

United States).

▶ Cash flow management by United States pharmaceutical

companies seems notwithstanding driven

by a more aggressive commercial policy.

Lengthening clients’payment periods is also a way of

reinforcing their loyalty and helping them to avoid

difficult bank lending conditions – in sum, the expression

of a policy more financial than industrial in

nature on the part of the United States pharmaceuticals

sector. The length of these payment periods,

which continue to grow, does put the United States

at the bottom of the class in this sector in terms of the

length of payment periods and of efforts made to

attempt reducing them (client payment periods up

by 49% and supplier payment periods up by 43%).

▶ Apart from a rebound in payment periods in 2009,

the French pharmaceutical industry, fifth in the rankings,

is not letting up on its efforts to shorten them.

In 2010, these were down by 10 days against 2006,

with cash flow needs of 14 days’revenue, well below

the figure for Germany (30 days), Spain (49 days),

Italy (50 days) the United States (55 days) and

Denmark (14 days). Committed to cutting average

payment periods, the pharmaceuticals sector in

Frances does not benefit however from the advantage

it gains by obtaining discounts in return for rapid

payment to its suppliers. ▣


Economic Outlook n° 1182 | Special Dossier | Payment periods Euler Hermes

Client payment periods: pharmaceuticals

Client payment periods in days’ revenue, 2010

Supplier payment periods in days’ revenue, 2010

120

100

30

25

20

15

10

-5

-10

-15

-20

-25

-30

80

60

40

20

5

0

0

70

60

50

40

30

20

10

0

FR

66

FR

52

IT

40

NO

16

DE

16

BE

54

DK

20

GB

31

-30% -20% -10% 0% 10% 20% 30% 40% 50% 60%

2007

ES

85

Indicator of change in client payment periods: pharmaceuticals

Source: Euler Hermes

IT

90

2008

GB

36

DK

38

Supplier payment periods: pharmaceuticals

2009

BE

63

2010

NO

25

-20% -10% 0% 10% 20% 30% 40% 50% 60% 70%

Source: Euler Hermes

ES

35

France

Germany

Spain

Italy

SE

11

United Sates

Denmark

SE

11

United Kingdom

DE

46

80

70

60

50

40

30

20

10

0

US

93

US

38

2006

2007

Change

Cash flow Tension Indicator: pharmaceuticals

Source: Euler Hermes

Change

2008

2009

2010

France

Germany

Spain

Italy

United States

United Kingdom

Denmark

23


Euler Hermes

24

IT services:

constrained by their clientele

Major clients have the strong suit in their

negotiations with IT services providers, resulting

for the latter in large cash flow requirements that

weaken businesses in the sector. Indeed, this is the

sector hit hardest by the weight of its accounts

receivable. As a result, it faces a large or very large

scissors effect in every country apart from Sweden.

Moreover, we see rigidity to a reduction in client

payment periods.

▶ Our study reveals very long client payment periods,

but supplier payment periods that are reasonably

good, or even low in some countries. The scissors

effect in very big in every country, but with a more

muted impact in Germany, the United Kingdom,

Belgium and Sweden.

Major clients have the advantage

of the stronger position in

negotiations, resulting in large

cash flow requirements that

weaken businesses in the sector.

Client and supplier payment period gap: IT services

Spain

Italy

France

Belgium

Germany

-24

United Kingdom -21

-27

-18

-30 -20 -10 0 10 20 30 40

Client payment period difference from average of 37 days

Supplier payment period difference from average of 53 days

Source: Euler Hermes

7

7

15

17

16

19

24

30

Economic Outlook n° 1182 | Special Dossier | Payment periods

▶ In France, despite the LME and a strong response

by the sector to cut these payment periods by 7% from

2006, client payment periods remain long, due to

major public sector customers. On the supplier side,

by contrast, little advance can be expected, inasmuch

as their purchases consist of intellectual services paid

for on a monthly basis, and materials that are already

paid for quickly in order to improve margins.

▶ Germany for its part is seeing a reversal in its cash

flow tension indicator that risks harming businesses

in the sector. Supplier payment periods are down only

slightly, as the initial payment periods were shorter

and there is a sharp separation between IT services

and IT equipment in the country, unlike in France. The

9% increase in client payment periods reflects

weakness in demand, but Germany’s payment

periods remain among the shortest in the sector in

Europe.

▶ The pronounced deterioration in the situation for

businesses in the sector in the United States, and the

more moderate one for those in the United Kingdom

and Belgium, is due primarily to an only small decline

in supplier payment periods and to weak demand. ▣

80

70

60

50

40

30

20

Cash flow Tension Indicator: IT services

2006 2007

Source: Euler Hermes

2008

2009

2010

France

Germany

Spain

Italy

United State

United Kingdom

Belgium


Economic Outlook n° 1182 | Special Dossier | Payment periods Euler Hermes

Aeronautic components:

stability in payment periods

sign of a healthy sector

The sample on which we base our conclusions in

this study is drawn for civil and military aeronautics

activities in the different countries examined.

▶ What sets this sector apart is the extremely high

level of concentration among aeronautics constructors

both in Europe and the United States, whose

levels of activity set the tone for subcontracting. At

the end of the chain, civil aviation constructors (business

or commercial aircraft, essentially in the zones

examined) benefit from advances paid by the airlines

ordering aircraft, staged from the signing of contracts

until delivery, in order to finance the production cycle

(with very high inventories and exposure). Moreover,

at times there are payments on account, higher upstream

in the chain, helping to ease cash flows.

With the notable exception of

Spain, the last three years have

seen relative stability in payment

periods.

▶ France, however, seems to show the impact of the

entry into force of the LME, with supplier payment

periods falling from 77 days in 2008 to 49 days in

2010, while in the United States, 2008 reflected the

destabilisation in the sector brought about by the

long strike at Boeing. This overall resistance, in the

face of the difficult economic situation that affected

all industrial sectors, is the sign of the excellent health

of the commercial aviation sector, buoyed by nearly

constantly increasing production, by contrast with

business aviation, which was seriously affected by falling

production and order books over the same

period.

▶ Not contradicting the distinction between

Northern and Southern Europe, already well demonstrated

in many sectors, and despite the convergence

in the sector towards a restricted number of customers,

the longest payment periods are in Italy (with

supplier payment periods of 60 days’revenue in

2010) and especially Spain (131 days in 2010). This

situation is grounded in local practices but is also

clearly due to the domestic economic environment

– particularly in the case of the big lengthening in

Spain, where supplier payment periods doubled between

2008 and 2010. Operators in both these countries

are thus exposed to penalising consequences

from the approaching application of the European

Directive. ▣

Client payment periods: aeronautic components

Client payment periods in days’ revenue, 2010

Supplier payment periods in days’ revenue, 2010

200

150

100

50

160

140

120

100

80

60

40

20

0

IT

67

IT

60

GB

40

FR

65

ES

131

FR

49

US

42

ES

153

DE

20

0

Change

-30% -10% 10% 30% 50%

Source: Euler Hermes

Supplier payment periods: aeronautic components

-40% -30% -20% -10% 0% 10% 20% 30% 40%

Source: Euler Hermes

GB

44

US

67

DE

51

Change

25


Euler Hermes

26

Construction: the sector

with the greatest disparities

Payment periods in large part reflect the particular

economic environment of the country in question.

This is a domestic sector in with

exceptional payment periods in

some countries.

> In France, the sector benefits from derogation in

payment periods.

Nonetheless, efforts are needed to shorten payment

periods. In fact, on 14 February, the then Minister in

charge of consumption, Frédéric Lefebvre, announced

an intensification of monitoring measures in

order to reduce payment periods deemed to be too

long. In 2012, the sector is supposed to begin posting

payment periods within the LME norms (45 days

from the end of the month or 60 days from the

invoice date). However, according to the Minister, the

reality is quite different, with payment periods running

between 76 and 92 days. The then government

wanted to introduce an amendment to the legislation

that would allow entrepreneurs to suspend work

in the event of late payments on intermediate instalment

invoices, the aim being to end the growing

number of cases of the law being circumvented. Even

though the effects of the LME and derogation agreements

are impacting on payment periods, it is hard

in this sector to reduce client payment periods due to

the nature of the clientele (individuals, the State and

state-owned enterprises in the sector). By our estimates,

this impacts negatively on businesses in the

sector.

> In Germany, the strict application of late payment

penalties allows a better result than does the LME as it

is applied in France. As a result, payment periods are

half as long as they are for French businesses in the

sector. We see a coordinated reduction in payment

periods and in cash flow requirements in the German

construction market, now lacklustre primarily for

demographic reasons.

Economic Outlook n° 1182 | Special Dossier | Payment periods

> Late payments are frequent in Spain, despite

already long contractual payment periods, and only a

small scaling back of extremely long client payment

periods has been achieved, by around only half as

much (-10%) as was achieved in Germany (-16%).

> In Italy, the construction sector is made up of many

businesses with low shareholders’capital, and the

weakness in demand has translated into long

payment periods and a sharp increase in cash flow

requirements.

> In the United Kingdom, public intervention helped

sustain activity in the construction sector but acted to

slow the reduction in client payment periods. The

United Kingdom shows a relatively coordinated

reduction in payment periods, at close to the average.

> In Belgium, businesses in the building and civil

engineering sector are unable to meet the client

payment periods imposed by the authorities, holding

back reductions in supplier payment periods in

response. Government authorities and especially

local authorities pay very late, a trend that is

accentuating.

> In the United States, we see an increase in supplier

payment periods (+18%), due to a fall in demand and

the large number of residences for sale. Client

payment periods have also risen considerably (+46%)

in this extremely poor market environment, on top of

which it is also difficult for prices of new-build housing

to rise. ▣


Economic Outlook n° 1182 | Special Dossier | Payment periods Euler Hermes

Client payment periods: construction

Client payment periods in days’ revenue, 2010

Supplier payment periods in days’ revenue, 2010

BE

70

0

-80%

Source: Euler Hermes

-60% -40% -20% 0% 20%

25

20

15

10

5

0

-5

-10

-15

-20

200

150

100

50

0

200

150

100

50

2007

DE

41

Indicator of change in client payment periods: construction

Source: Euler Hermes

SE

47

ES

174

BE

82

2008

FR

87

NO

63

GB

33

IT

127

Supplier payment periods: construction

2009

2010

DK

57

-20% -10% 0% 10% 20% 30% 40% 50%

Client and supplier payment period gap: construction

Spain

Italy

Belgium

France

Germany

-20

-20

United Kingdom

-28

Source: Euler Hermes

-10

9

22

21

26

-40 -20 0 20 40 60 80 100 120 140

Client payment period difference from average of 37 days

Supplier payment period difference from average of 53 days

66

66

109

113

France

Germany

Spain

Italy

Belgium

SE

27

United States

United Kingdom

FR

57

DE

28

IT

114

GB

38

40

35

30

25

20

15

10

5

0

-5

-10

ES

157

DK

38

2006

NO

33

2007

US

43

Change

Cash flow Tension Indicator: construction

Source: Euler Hermes

US

53

Change

2008

2009

2010

France

Germany

Spain

Italy

United States

United Kingdom

Belgium

27


Euler Hermes

28

Comparison between

Germany-France

Payment periods by sector

Germany

France

Automobiles

Air transport

Aeronautic

components

Automobiles

National

average

15 days 35 55

Automotive

components

National

average

Chemicals

Air transport

Aeronautic

components

Pharmaceuticals

Automotive

components

40 days 60 80 100

Source: Euler Hermes

Four determinants

to note

Construction

Chemicals

Pharmaceuticals

Construction

IT services

IT services

Economic Outlook n° 1182 | Special Dossier | Payment periods

▶ There are four determining factors

explaining these disparities between sectors:

> 1. The organisation of the sectors themselves, an example being the

round table in the automotive components sector in France, which

enabled subcontractors to even out client and supplier payment

periods.

> 2. When the suppliers are global, sectors such as chemicals benefit

from a limited variation in payment periods.

> 3. The health of the sector, an example being the construction sector

in Spain, which shows the difficulties undergone because of the

crisis.

> 4. The negotiating strength of big clients and big suppliers who

impose longer payment periods, such as in the IT services sector.


Economic Outlook n° 1182 | Special Dossier | Payment periods

Annex I

Annexes

▶ Law on the Modernisation of the Economy

(LME) and sector round tables in France

LME in pharmaceuticals

Following the implementation of the LME of 2008

in France, subject to the decree of 22 September,

trade associations representing French pharmacies

signed an accord with the trade association of

French pharmaceutical manufacturers (LEEM) to

be applied gradually to payments for non-prescription

drugs, which account for 10% of the pharmaceuticals

market.

According to the AFIPA, the trade body that represents

the self-medication medicines industry,

payment periods for non-prescription medicines

were much longer than for other medicines, running

from 180 days to 360 days for seasonal products

(e.g., winter remedies and anti-allergy

drugs).

In France: under a derogation for non-prescription

drugs, the payment periods agreed by the

parties to settle invoices due may not exceed:

> 90 days from invoice date for 2009

> 70 days from invoice date for 2010

> 60 days from invoice date from 1 January.

These payment periods run from the date of issue

of the invoice.

Round tables in the automotive components sector

In France: the code of good practice of28 June 2006 allows for balanced and more lasting and harmonious

client/supplier relations through the sector, where the client must:

> send a late payment penalty without the supplier having to request it

> not alter the payment term for reasons not set out in the contract (notably arising from internal failings

in its administrative departments)

> furnish a means of payment that can be mobilised or financed to the supplier who requests it and do

so within 20 days of receiving the invoice, in the absence of any litigation

Agreement on payment periods of 27 January: additional to the code of good practice for payment

periods:

> the payment period between clients and subcontractors is cut to a maximum of 90 days effective 1 September

Client businesses in the sector with turnover in excess of 300 million euros will give an additional reduction

in payment periods of 30 days to suppliers with turnover of less than 50 million euros, according

to the following modalities: maximum payment periods of 75 days effective 1 September and of 60 days

effective 1 September.

LME construction

In France: under derogation in the construction and

civil engineering sector, the parties agree the following

maximum payment periods:

> 70 days from end of month effective 1 January

> 60 days from end of month effective 1 January

> 50 days from end of month effective 1 January

> 45 days from end of month effective 1 January

The 35 derogations of the LME

> toys; DIY; watches and jewellery; construction and civil engineering; plumbing, heating

and electrical equipment; book publishing; stationery and office supplies; tyres; metal

packaging closures and metal tins for food; optional non-reimbursable prescription

drugs; sales of pets, products and accessories for pets; two or three-wheeled motorised

and quad bikes; boating; amateur gardening; industrial equipment and hardware; agricultural

supplies; agricultural equipment; paints, inks, colours, glues and adhesives; optical

spectacles; cooperage; sporting goods; print industry; music CDs and DVDs; amateur

fishing; arts and crafts; leather; steel products for construction; recreational vehicles;

marine and inland aquaculture; food supplements; roundwood logs and standing

timber; wholesaling of automotive tools; hunting arms and ammunition; textiles and

clothing.

29


Euler Hermes

Annex II

30

Payment defaults in Italy

A close examination of payment defaults of Italian

businesses reveals great disparities between

regions and sectors via two key indicators: the rate

of non-payment and the severity (average

amount) of missed payments.

On the domestic market, the victims of the crisis in

consumption, of international competition (e.g.,

footwear) or of the rise in energy prices (e.g., paper

manufacturing) saw default amounts increase.

Chemicals also saw a rise in these amounts.

Exports, a key element in the Italian economy in 2011,

now are a matter of great concern over the rate of

payment defaults in industry, agriculture, foods,

chemicals and mechanical engineering.

Italy’s strong exports to troubled economies such as

Spain, Greece and Portugal have a considerable

impact on the severity of non-payments. We also see

an increase in the average payment default amount in

the steel, footwear and construction sectors.

Italy -

Domestic market – 2007 to March 2012 trend

(basis, 2007 = 100) (basis, 2007 = 100)

200

150

100

50

0

2008

Rate

Amount

2009

Source: Euler Hermes

2010

2011

Q1 2012*

Regional disparities are increasing in the crisis: the

south and centre of Italy are more exposed to liquidity

problems during economic slowdowns. In the north

of the country, in Piedmont and Liguria, show a

sustained trend of increasing rate (depending on the

production specialisation in these regions, i.e.,

automobiles and naval industries). In central and

southern regions, the trend deteriorates more quickly,

with some diverging trends for certain regions like

Molise and Calabria, which are just improving after a

deep crisis. ▣

Italy -

Export market – 2007 to March 2012 trend

150

120

90

60

30

2008

Rate

Amount

2009

Source: Euler Hermes

2010

Economic Outlook n° 1182 | Special Dossier | Payment periods

2011

Q1 2012*


Economic Outlook n° 1182 | Special Dossier | Payment periods Euler Hermes

Annexe III

▶ Detailed data, by country

Germany Client Supplier Client Supplier Cash flow

payment payment payment period payment period tension

period period growth indicator growth indicator indicator

2000 30 21.6 8.3

2001 27.3 19.7 -9% -8.9% 7.6

2002 26.6 19.2 -2.4% -2.6% 7.4

2003 26.1 19.0 -1.8% -0.8% 7.1

2004 25.5 18.9 -2.2% -0.8% 6.7

2005 25.3 18.7 -1% -0.9% 6.6

2006 25.4 18 0.5% -3.8% 7.4

2007 25.2 18.5 -0.8% 2.6% 6.7

2008 22.6 16.7 -10.2% -9.5% 5.9

2009 23.4 17.1 3.6% 2.5% 6.3

2010 23.7 18.5 1% 7.9% 5.2

2011 23.5 18.5 -1% 0% 5

2012 23.3 18.5 -0.5% 0% 4.9

2013 23.1 18.5 -1% 0% 4.6

France Client Supplier Client Supplier Cash flow

payment payment payment period payment period tension

period period growth indicator growth indicator indicator

2000 68.0 58.3 9.6

2001 64.5 56.2 -5.1% -3.6% 8.3

2002 63.2 55.1 -2.0% -2.0% 8.1

2003 62.4 54.3 -1.2% -1.5% 8.2

2004 61.2 54.0 -2.0% -0.6% 7.2

2005 63.3 55.3 3.4% 2.5% 8

2006 63.4 55.5 0.3% 0.3% 8

2007 63.2 55.8 -0.3% 0.7% 7.4

2008 63.1 53.2 -0.2% -4.7% 9.9

2009 60.7 51.1 -3.7% -4.1% 9.7

2010 61.4 52.4 1.1% 2.6% 9

2011 62 53.2 0.9% 1.6% 8.7

2012 62.3 53.2 0.5% 0% 9

2013 62.9 53.8 1% 1% 9.1

Spain Client Supplier Client Supplier Cash flow

payment payment payment period payment period tension

period period growth indicator growth indicator indicator

2000 69.6 64.2 5.3

2001 69.5 64.2 -0.1% 0% 5.3

2002 70.6 64.6 1.5% 0.7% 5.9

2003 69.2 64.7 -1.9% 0.1% 4.5

2004 69.8 64.8 0.8% 0.2% 4.9

2005 71.2 67.0 2% 3.3% 4.2

2006 71.5 67.4 0.4% 0.6% 4.1

2007 73.5 69.5 2.9% 3.1% 4

2008 70.6 66.9 -3.9% -3.8% 3.8

2009 80.9 75.3 14.6% 12.6% 5.6

2010 79.0 75.3 -2.4% 0% 3.6

2011 78.3 74.8 -0.9% -0.8% 3.5

2012 80.2 76.3 2.5% 2% 4

2013 80.6 76.6 0.5% 0.5% 4

Portugal Client Supplier Client Supplier Cash flow

payment payment payment period payment period tension

period period growth indicator growth indicator indicator

2000 68.3 51.6 16.7

2001 71.4 53.8 4.6% 4.4% 17.6

2002 69.6 53.7 -2.6% -0.2% 15.9

2003 70.9 55.3 1.8% 3% 15.5

2004 70.1 55.4 -1% 0.1% 14.7

2005 69.0 54.8 -1.6% -1.2% 14.2

2006 76.4 64.4 10.8% 17.6% 12.0

2007 76.8 64.8 0.4% 0.6% 12.0

2008 72.7 61 -5.3% -5.8% 11.7

2009 79.8 65.3 9.8% 6.9% 14.6

2010 81.7 66.3 2.3% 1.6% 15.4

2011 82.3 66 0.8% -0.4% 16.3

2012 83.6 65.4 1.5% -1.0% 18.2

2013 83.6 65.4 0% 0% 18.2

Source: Euler Hermes

Poland Client Supplier Client Supplier Cash flow

payment payment payment period payment period tension

period period growth indicator growth indicator indicator

2005 45.4 45.3 0.1

2006 45.6 44.6 0.4% -1.4% 0.9

2007 44.5 43.7 -2.3% -2.2% 0.9

2008 43.7 43.3 -1.8% -0.9% 0.4

2009 44.3 44.1 1.3% 2.0% 0.1

2010 45.3 44.9 2.3% 1.8% 0.4

2011 44.1 43.3 -2.7% -3.7% 0.8

2012 43.2 42.3 -2.0% -2.3% 0.9

2013 42.1 41.1 -2.5% -2.7% 1

Belgium Client Supplier Client Supplier Cash flow

payment payment payment period payment period tension

period period growth indicator growth indicator indicator

2000 69.8 56.9 12.9

2001 67.3 54.4 -3.6% -4.3% 12.8

2002 64 43.7 -4.8% -19.6% 20.3

2003 67,8 53.8 5.9% 23.1% 13.9

2004 72.1 58.2 6.5% 8.1% 13.9

2005 65.9 53.5 -8.6% -8.1% 12.4

2006 64.3 51.8 -2.5% -3.2% 12.5

2007 65.5 51.8 2% 0% 13.7

2008 60.7 47.3 -7.3% -8.7% 13.4

2009 64.8 51.8 6.7% 9.4% 13

2010 63.2 52.2 -2.5% 0.9% 11

2011 61.6 50.7 -2.5% -2.9% 10.9

2012 61.6 50.7 0% 0% 10.9

2013 60.7 49.8 -1.5% -1.8% 10.9

Italy Client Supplier Client Supplier Cash flow

payment payment payment period payment period tension

period period growth indicator growth indicator indicator

2000 105.9 85.7 20.2

2001 102.7 81.9 -3% -4.5% 20.8

2002 106.1 83.3 3.3% 1.8% 22.8

2003 105.2 82.6 -0.9% -0.9% 22.6

2004 102.4 82.2 -2.7% -0.5% 20.2

2005 104.5 83.8 2.1% 2% 20.7

2006 102.8 81.2 -1.7% -3.2% 21.6

2007 100.8 80.8 -1.9% -0.5% 20

2008 99.6 77.2 -1.2% -4.4% 22.4

2009 106.8 82.5 7.2% 6.9% 24.2

2010 105.9 82.3 -0.8% -0.3% 23.7

2011 105.3 81.8 -0.6% -0.5% 23.5

2012 107.4 83.5 2% 2% 24

2013 107.4 83.5 0% 0% 24

31


Euler Hermes

Annexe IV

▶ Detailed data, by sector

Automobiles Client Supplier Client Supplier Cash flow

payment payment payment period payment period tension

period period growth indicator growth indicator indicator

France 41 50 1% -12% -8

Germany 21 34 14% 45% -13

Spain 48 56 -27% 10% -8

Italy 37 75 -12% -4% -38

United States 42 79 -97% -86% -37

United Kingdom 31 34 56% 26% -3

Belgium 41 69 -6% 27% -28

Denmark 40 45 10% 33% -5

Norway 45 47 -23% 10% -2

Sweden 19 37 -47% 15% -18

Chemicals Client Supplier Client Supplier Cash flow

payment payment payment period payment period tension

period period growth indicator growth indicator indicator

France 59 51 -11% -8% 8

Germany 46 29 -3% 1% 17

Spain 67 46 -30% -1% 21

Italy 93 63 -8% -9% 30

United States 61 41 22% 16% 20

United Kingdom 30 28 -15% 10% 3

Belgium 58 47 14% 7% 12

Denmark 57 29 11% 12% 28

Norway 40 31 1% 4% 9

Sweden 32 24 -7% -9% 8

Construction Client Supplier Client Supplier Cash flow

payment payment payment period payment period tension

period period growth indicator growth indicator indicator

France 87 57 -6% -18% 30

Germany 41 28 -16% -19% 13

Spain 174 157 -10% -3% 17

Italy 127 114 -1% -6% 13

United States 53 43 46% 18% 11

United Kingdom 33 38 -2% -10% -5

Belgium 82 70 -10% -13% 12

Denmark 57 38 -11% -9% 19

Norway 63 33 -10% -21% 30

Sweden 47 27 -5% 6% 21

Air Client Supplier Client Supplier Cash flow

transport payment payment payment period payment period tension

period period growth indicator growth indicator indicator

France 44 44 -2% 8% 1

Germany 29 31 2% 14% -2

Spain 34 62 -45% 51% -29

Italy 29 58 -35% -16% -30

United States 21 22 5% 5% -1

United Kingdom 17 25 -29% 43% -8

Belgium 51 49 47% 12% 3

Denmark 15 23 -13% -17% -8

Norway 21 19 -19% -30% 2

Sweden 12 17 -31% -6% -5

Note: client payment period, supplier payment period and cash flow tension indicator are for 2010; client and supplier period growth indicators are for 2006-2010.

Source: Euler Hermes

32

Economic Outlook n° 1182 | Special Dossier | Payment periods

Automotive Client Supplier Client Supplier Cash flow

components payment payment payment period payment period tension

period period growth indicator growth indicator indicator

France 54 53 -21% -21% 2

Germany 36 24 0% -4% 12

Spain 83 52 -18% 2% 31

Italy 111 96 3% -2% 14

United Kingdom 68 41 -12% -30% 26

Belgium 67 49 -17% -14% 18

Denmark 55 20 -2% -5% 35

Norway 40 27 -33% -14% 13

Sweden 51 39 -26% -9% 12

Pharmaceuticals Client Supplier Client Supplier Cash flow

payment payment payment period payment period tension

period period growth indicator growth indicator indicator

France 66 52 -13% -16% 14

Germany 46 16 41% -10% 30

Spain 85 35 -11% 18% 50

Italy 90 40 -6% -15% 50

United States 93 38 49% 43% 55

United Kingdom 36 31 -1% 7% 5

Belgium 63 54 12% 7% 9

Denmark 38 20 2% 4% 18

Norway 25 16 16% -11% 9

Sweden 11 11 31% 25% 0

IT services Client Supplier Client Supplier Cash flow

payment payment payment period payment period tension

period period growth indicator growth indicator indicatorr

France 95 51 -7% 3% 44

Germany 52 25 9% -8% 27

Spain 107 61 -14% 14% 46

Italy 101 60 -2% -5% 41

United States 72 21 16% -10% 51

United Kingdom 50 23 0% -12% 27

Belgium 84 58 -4% -10% 25

Denmark 54 26 -17% 5% 28

Norway 64 25 -8% -3% 39

Sweden 33 23 -5% -7% 9

Aeronautic Client Supplier Client Supplier Cash flow

components payment payment payment period payment period tension

period period growth indicator growth indicator indicator

France 65 49 -5% -14% 16

Germany 20 51 -21% 37% -32

Spain 153 131 8% -17% 22

Italy 62 60 -22% -31% 2

United States 67 42 42% -15% 25

United Kingdom 40 44 -12% 5% -4


Economic Outlook n° 1182 | Special Dossier | | Payment periods

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filial af Euler Hermes Europe SA Belgien

Amerika Plads 19

2 100 Copenhague O

Tel.:+45 88 333 388

> Estonia

Please contact Finland

> Finland

Euler Hermes Europe S.A.

Suomen sivuliike

Mannerheimintie 105

00280 Helsinki

Tel.:+358 10 850 8500

> France

Euler Hermes France SA

Euler Hermes Collection

Euler Hermes World Agency

1, place des Saisons

F-92048 Paris-La-Défense Cedex

Tel.: +33 1 8411 5050

> Germany

Euler Hermes Deutschland AG

Euler Hermes Rating Deutschland AG

Friedensallee 254

22763 Hamburg

Tel.: +49 40 8834 0

Federal Export Credit Guarantees

Friedensallee 254

22763 Hamburg

Tel.: +49 40 8834 9000

Euler Hermes Collections GmbH

Zeppelinstr. 48

14471 Potsdam

Tel.: +49 331 27890-000

Greece

Euler Hermes Emporiki SA

16 Laodikias Street & 1-3 Nymfeou Street

115 28 Athens

Tel.:+30 210 69 00 000

> Hong Kong

Euler Hermes Hong Kong Services Ltd

Suites 403-11, 4/F

Cityplaza 4

12 Taikoo Wan Road - Island East

Hong Kong

Tel.:+852 2867 0061

> Hungary

Euler Hermes Europe S. A

Magyarrorszagi Fioktelepe

Kiscelli u. 104

1037 Budapest

Tel.: +36 1 453 9000

> India

Euler Hermes India Pvt. Ltd

4th Floor, Voltas House

23, j N Heredia Marg

Ballard Estate

Mumbai 400 001

Tel.:+91 22 6623 2525

> Indonesia

PT Asuransi Allianz Utama Indonesia

SSummitmas II. Building, 9th floor

jl. jenderal Sudirman Kav 61-62

jakarta 12190

Tel.: +62 21 252 2470 ext. 6100

> Ireland

Euler Hermes Ireland

The Arch

Blackrock Business Park

Carysfort Avenue

Blackrock

Co. Dublin

Tel.:+353 1 200 0400

> Israël

ICIC

2, Shenkar Street

68010 Tel Aviv

Tel.: +97 23 796 2444

> Italy

Euler Hermes Europe S.A.

Rappresentanza per l’Italia

Via Raffaello Matarazzo, 19

00139 Rome

Tel.:+39 06 87001

> japan

Euler Hermes Deutschland AG,

japan Branch

Kyobashi Nisshoku Bldg. 7th floor

8-7, Kyobashi, 1-chome,

Chuo-Ku

Tokyo 104-0031

Tel.:+81 3 35 38 5403

> Kuwait

Please contact United Arab Emirates

33


Euler Hermes

34

> Latvia

Please contact Poland

> Lithuania

Please contact Poland

> Malaysia

Please contact Singapore

> Mexico

Euler Hermes Seguro de Crédito S.A.

Blvd. Manuel Avila Camacho #164, 8° piso

Col. Lomas de Barrilaco

Deleg. Miguel Hidalgo

Mexico DF CP 11010

Tel.:+52 55 5201 7900

> Morocco

Euler Hermes Acmar

37, bd Abdelatiff Ben Kaddour

20 050 Casablanca

Tel.:+212 5 22 79 03 30

> The Netherlands

Euler Hermes Kredietverzekering NV

Pettelaarpark 20

5216 PD’s-Hertogenbosch

Tel.:+31 73 688 99 99

> New Zealand

Euler Hermes New Zealand Ltd.

Level 1, 152 Fanshawe Street

Auckland 1010

Tel.:+64 9 354 2995

> Norway

Euler Hermes Norge

Holbergsgate 21

P.O. Box 6875

St. Olavs Plass

0130 Oslo

Tel.:+47 23 25 6000

> Oman

Please contact United Arab Emirates

> Philippines

Please contact Singapore

> Poland

Towarzystwo Ubezpieczen Euler Hermes S.A.

ul. Domaniewska 50 B

02-672 Warsaw

Tél.:+48 22 363 6363

> Portugal

COSEC - Companhia de Seguro de Créditos, S.A.

Avenida da República, nº 58

1069-057 Lisbon

Tel.:+351 21 791 3700

> Qatar

Please contact United Arab Emirates

> Romania

Euler Hermes Europe SA Bruxelles

Sucursala Bucuresti

Str. Petru Maior Nr.6

Sector 1

011264 Bucarest

Tel.:+40 21 302 0300

> Russia

Euler Hermes Credit Management OOO

Office C08, 4-th Dobryninskiy per., 8,

Moscou, 119049

Tel.:+7495 98128 33 ext.4000

> Saudi Arabia

Please contact United Arab Emirates

> Singapour

Euler Hermes Singapore Services Pte Ltd

3 Temasek Avenue

# 03-02 Centennial Tower

Singapour 039190

Tel.:+65 6297 8802

> Slovakia

Euler Hermes Europe SA, poboka poist’ovne z

ineho clenskeho statu

Plynárenská 1

82109 Bratislava

Tel.:+421 2 582 80 911

> South Africa

Please contact Italy

> South Korea

Euler Hermes Credit Underwriters HK Ltd.

Korea Liaison Office

Rm 1411, 14/F, Sayong - Platinum Bldg

156, Cheokseon-dong,

Chongro-ku,

Seoul 110 052,

Tel.:+82 2 733 8813

> Spain

Euler Hermes Crédito,

Sucursal en España de Euler Hermes SFAC, S.A.

Paseo de la Castellana, 95

Planta 14

Edificio Torre Europa

28046 Madrid

Tel.:+34 91 417 77 67

> Sri Lanka

Please contact Singapore

> Sweden

Euler Hermes Sverige filial

Klarabergsviadukten 90

P.O. Box 729

111 64 Stockholm

Tel.:+46 8 55 51 36 00

> Switzerland

Euler Hermes Deutschland AG,

Zweigniederlassung Zürich

Tödistrasse 65

8002 Zürich

Tel.:+41 44 283 65 65

Euler Hermes Reinsurance

Tödistrasse 65

8002 ZürichTel.:+41 44 283 65 85

> Taiwan

Please contact Hong Kong

> Thailand

Allianz C.P. General Insurance Co., Ltd

323 United Center Building, 30 th Floor

Silom Road.

Bangrak, Bangkok 10500

Tel. + 66 2638 9000

Economic Outlook n° 1182 | Special Dossier | Payment periods

> Tunisia

Please contact Italy

> Turkey

Euler Hermes Turkiye

Iz Plaza Giz Ayazağa Yolu

Eski Büyükdere Cad. No: 9 Kat: 14

Maslak/Istanbul

Tel.:+90 212 290 76 10

> United Arab Emirates

Euler Hermes

c/o Alliance Insurance Co (PSC)

Warba Center 4th Floor

Office 405

PO Box 183957

Dubai

Tel.:+971 4 211 6005

> United Kingdom

Euler Hermes UK

1 Canada Square

Londres E14 5DX

Tel.:+44 20 7 512 9333

> United States

Euler Hermes North America

Insurance Company

800 Red Brook Boulevard

Owings Mills, MD 21117

Tel.:+1410 753 0753

Euler Hermes UMA Inc.

(trade debt collection)

600 South 7th Street

Louisville, KY 40201-1672

Tel.: +1 800 237 9386

> Vietnam

Please contact Singapore

Subsidiaries

Registered office: Euler Hermes Group

1, Place des Saisons

92 048 Paris La Défense CEDEX

France

Tel.:+33 (0) 1 84 11 53 77

Fax:+33 (0) 1 84 11 54 87

www.eulerhermes.com


Economic Outlook n° 1182 | Special Dossier | Payment periods Euler Hermes

Economic Outlook

series…

N° 1170 > Special Dossier

Rebound in worldtrade in 2010 confirms the shift already underway before the crisis.

N° 1171 > Business Insolvency Worldwide

The fall ininsolvencies is confirmed, but on a modest scale and in uneven fashion.

N° 1172 > Global Macroeconomic Review

In the face of slowdowns and turbulence, world economic recovery is going through tumultuous times.

N° 1173 > Global Sectors Review

Global economic recovery continues, but new threats are arising.

N° 1174 > Business insolvency in France (only available in French)

The decline ininsolvencies remains modest overall and stillvery uneven, with a high number of cases.

The French economic environment - the slowdown continues.

N° 1175 > Global Macroeconomic Perspectives

The slowdown is confirmed, the weaknesses remain, the risks endure.

N° 1176 > Special Dossier

Green Economy.

N° 1177-1178 > Macroeconomic, Risk and Insolvency Outlook

On the edge.

N° 1179 > Global Sectors Review

Looking for growth where it can be found.

N° 1180 > Business insolvency in France (only available in French)

The overall decrease in French insolvencies hides several weaknesses.

N° 1181 > Macroeconomic, Risk and Insolvency Outlook

A fog cannot be dispelled by a fan.

N° 1182 > Special Dossier

Payment periods in Europe: wide gaps

To come:

N° 1183-84 > Macroeconomic, Risk and Insolvency Outlook

35


joncture internationale et risques pays

ralentissement se confirme,

s faiblesses demeurent,

s risques persistent

www.eulerhermes.com

Euler Hermes Economic Outlook is published quaterly

by the Economic Research Department of Euler Hermes

1, place des Saison, 92048 Paris La Défense Cedex - Tel. : +33 (0) 1 84 11 53 77

This document reflects the opinion of the Economic Research Department of Euler Hermes.

The information, analyses and forecasts contained herein are based on the Department's current hypotheses and viewpoints

and are of a prospective nature. In this regard, the Economic Research Department of Euler Hermes has no responsibility for

the consequences hereof and no liability. Moreover, these analyses are subject to modification at any time.

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