EU Businesses Could Face Historic Recession

Intrum‘s new European Payment Report, published Monday (Sept. 28), chronicles a shaken European economy in which several EU businesses are taking necessary steps to prepare for a recession, according to a press release.

Decreased revenues have crunched cash flows and put pressure on outgoing payments, the release stated, with Intrum President and CEO Mikael Ericson saying the impact of the pandemic will continue to be “dramatic.”

Almost half of respondents, or 46 percent, said a widening payment gap could put their business at risk, and 43 percent see risk from debtors over the next year or so. The payment gap, according to the release, means the time between the agreed-upon payment and the actual time it takes to pay has increased to 14 days. In 2019, the time was around six days.

Around six in 10 respondents to the Intrum survey said a recession would be a top challenge in terms of consumers paying on time, according to the release. Thirty-eight percent of respondents plan to cut costs to shield against a possible recession, while 35 percent will be more cautious about debt, and 29 percent are likely to cut down on recruitment.

The pandemic increased the threat of late payments for businesses, the release stated, with 51 percent of respondents saying late payments threatened a liquidity squeeze. That’s up from only 35 percent before the pandemic began.

The late payments will hit different types of businesses in different ways, with the release stating that the hardest-hit will likely be real estate and construction businesses.

The U.S. is not out of the water when it comes to the pandemic, either, with the threat of a credit crunch depending on whether or not a new surge of virus cases crop up during the winter. The much-talked-about second wave of infections might happen as the weather gets colder and flu season begins. Recovering businesses and consumers could have trouble accessing credit if foreclosures rise and more businesses close down.