European companies are demanding quicker payments from customers, partly in order to mitigate tougher credit conditions set by their banks due to the global credit squeeze, a study by a credit insurer has shown.
The survey of 1,200 companies by Atradius, the Dutch credit insurer, showed that companies in five of six European markets surveyed had shortened their average terms of payments since a year ago. French companies cut the term from 49 to 46 days while Germans cut their already short 27 days to 26.
“It’s not many days that it has shrunk – one, two, three or up to five, but it is consistent and in that sense it is remarkable,” Bert Bruning, Atradius country manager for the Netherlands, said. “We see it as a sign that companies are becoming a bit more careful.”
The survey follows more mainstream indicators showing that European businesses are not optimistic about the economy, although business confidence has remained relatively robust.
Prospects of an economic turndown were also fuelling caution with creditors, Mr Bruning said. However, there has not yet been a rise in claims on credit insurance, despite further early warning signs such as one month of data showing that bankruptcies were rising in the Netherlands for the first time since 2004.
Premiums on credit insurance have not gone up although it was “unavoidable” that they would, Mr Bruning said.
Of the six countries surveyed, only businesses in Italy extended the time they gave creditors to pay – from 80 days to 81, reflecting traditionally looser terms. It was also matched by a worse assessment among businesses in the study of their customers’ payment practices.
In Britain, firms demanded payment on average after 35 days, against 37 a year ago and in the Netherlands the term dropped to 28 days from 31.
Atradius also found that only 65 per cent of European companies take any measures to ensure they are paid and, of those, less than a third take out credit insurance.
“Of course I’m not objective, but we should raise a finger and say you have to be prepared,” Mr Bruning said.
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