STOCKHOLM, July 2, 2020 /PRNewswire/ (Press Release) — Intrum has published a white paper that confirms the negative financial impact of the COVID-19 crisis on the business outlook, the effects on the payment landscape, and financial behaviour. The survey was conducted among financial executives and business leaders in 9,980 companies across 29 European countries.
Sharp drops in GDP across Europe are now pushing down revenues for businesses, restricting cash flow while increasing pressure on businesses to manage their cash and liquidity more efficiently.
“Safeguarding a steady cash flow through timely payment is more important than ever. Many businesses are now operating in survival mode, as they have been forced to rapidly close down due to government lockdowns following the Covid-19 pandemic,” says Mikael Ericson, President and CEO of Intrum.
The long-term economic effects of Covid-19 on European businesses are uncertain. But in the short-term, the crisis is already affecting consumers, leading to increased negative financial pressure and wellbeing. Lower disposable incomes are impacting consumers’ ability to pay invoices on time.
Hospitality and leisure has taken a big hit
“Government restrictions on travel, shopping, dining out, exercise, and other leisure activities have hit Europe’s hospitality and leisure industry hard, says Ericson. Lockdowns are now being lifted across Europe, but it is likely that the pandemic will have a lasting impact on businesses within these industries.”
About four in 10 survey respondents from this sector (42 percent) say that a recession will have a severe impact on their businesses – the highest figure of the 11 industries Intrum surveyed.
Recession is the top challenge for companies during COVID-19, with 44% citing it as having a severe impact on their business, up from 26% pre-crisis
• More than half (56%) say their country is already in recession or will be within a year (2019: 28%)
◦ COVID-19: pre: 42%, during: 64%
◦ Italy: 83%, Belgium/Slovakia: 81%
• 4 in 10 (38%) say that a recession will have a severe impact on their businesses
◦ COVID-19: pre: 26%, during: 44%
◦ Hospitality and leisure rank highest (42%)
◦ 57% rank risk of a pan-European recession in the top three payment challenges over the next twelve months
◦ COVID-19: pre: 41%, during: 66%
Help to navigate a challenging environment
Against this backdrop of exceptional change and disruption, businesses are looking for extended help to navigate through the challenges. There is also a rise in the adoption of the EU Late Payment Directive**, which 23 per cent of European businesses in the survey say they always use, compared to 8 per cent in 2019.
“Half of European companies now seek initiatives to prevent late payments from corporations and new legislation to tackle the problem, which is a positive sign. These initiatives will be essential in ensuring steady cash flow for European businesses post-crisis,” says Ericson.
* Intrum has gathered data from 9,980 companies across 29 European countries covering 11 industry sectors. The survey was conducted during February and May 2020 (pre and during Covid-19).
** The Late Payment Directive is a Directive of the European Union which aims to achieve a shift to a culture of prompt payment. The Late Payment Directive recommend payment periods for companies to be at most 60 days and for public authorities 30 days.
The full whitepaper is available here: www.intrum.com/epr2020-whitepaper
PHOTO: Shuttered cafe during coronavirus lockdown Reuters