Analysts Anticipate Rise In EU Business Failures

Analysts are expecting an increase in business failures across Western Europe, according to a new report from Atradius.

The firm released its October 2019 Atradius Payment Practices Barometer survey for Western Europe on Tuesday (Oct. 22) and estimated that businesses are facing a 2.7 percent increase in insolvencies by the end of 2019. That figure is expected to increase in 2020, the report noted.

Continuing trade tensions and uncertainty between China and the U.S., as well as the uncertain future of the relationship between the U.K. and Europe due to Brexit, are top factors behind this trend, the report said.

“There is no end to challenging times in sight this year, and the forecast for next year is not positive either,” warned Atradius Chief Market Office Andreas Tesch. “The global business environment has deteriorated and is expected to remain troublesome over the coming months. Insolvencies are expected to increase again in 2020, putting the financial stability of businesses under severe strain.

“By managing cash flow successfully, businesses can reduce the risk of a devastating financial loss caused by an insolvent buyer.”

Researchers found that another result of this rise in uncertainty is the growing reliance of trade credit, with Western European B2B vendors selling more than 60 percent of the total value of their orders on credit, an increase from 41.4 percent last year.

The report noted, however, that this use of trade credit varies depending on the country. Vendors in Denmark sell 75.5 percent of the total value of their invoices on credit, whereas those in France sell 44.6 percent of their sales on credit.

In terms of late payments, nearly 30 percent of the total value of B2B invoices issued by B2B companies that responded to the survey across Western Europe were paid late. That figure jumps to 35.1 percent in the U.K. and 34.8 percent in Greece, while in Denmark — the region with the highest use of trade credit — the figure drops to 20.3 percent, the lowest in the region.