European businesses are preparing for a historic recession

Almost six in ten respondents at an Intrum survey say a Pan-European recession is a top three challenge when it comes to consumers paying on time over the next twelve months.

In the survey, two measures among European companies clearly stand out. In order to protect their business in preparation for a recession and an economic upheaval, 38 per cent of respondents plan to cut costs, while 35 per cent will be more cautious about debt.

29 per cent say they are looking to cut down on recruitment to prepare for a recession, compared to 18 per cent in 2019.

”Businesses are now taking necessary steps to prepare for a recession caused by the pandemic. Decreased revenues have reduced businesses’ cash flow and increased pressure on their outgoing payments”, says Mikael Ericson, President and CEO of Intrum.

The payment gap is widening

The estimated time between the agreed payment term and the actual duration of pay is now 14 days compared to 6 days in 2019 in B2B corporate payments.

More than four in ten respondents (43 per cent) see risk from debtors increasing over the next twelve months and 19 per cent say it will increase significantly. Businesses are under increasing pressure by reduced liquidity, leaving many of them to search for alternative ways to free up cash.

Nearly half (46 per cent) say the widening gap is a real risk to the sustainable growth of their business. During the crisis, more than half (51 percent) said that late payments threatened a liquidity squeeze for their business, compared to 35 percent of those surveyed before the crisis

Real estate and construction hit hardest by late payments

Intrum report highlights that businesses in the real estate and construction sector have been hit hardest by late payments. 41 per cent of these businesses say they now have accepted longer payments to avoid bankruptcy, whereas the European average is 35 per cent.

At the same time, as previously reported, companies within hospitality and leisure still struggle with different government restrictions across Europe.

Within this sector, four in 10 respondents (42 per cent) say that a recession will have a severe impact on their businesses – the highest figure of the 11 industries Intrum surveyed.

Intrum has gathered data from 9.980 companies across 29 European countries covering 11 industry sectors. The survey was conducted during February to May 2020 (pre and during Covid-19).

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