Payment periods in - Euler Hermes

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. ▣