Europe’s corporate sector plans to cut costs despite growing optimism in the economy, and late payments continue to take a toll on companies. This shows the new European Payment Report (EPR), which summarizes the results of a survey among over 9 000 small, medium and large companies in 25 countries in Europe.

Bulgaria is also among the countries in the survey. Bulgarian business performs stronger compared to the average for the continent in terms of expectations and achieved results. At the same time the country performs worse on the indicator of timely payments.

Just over 40% of businesses in Europe plan to cut spending this year – the highest share since the COVID-19 outbreak. For comparison – in 2021, 28% of companies had such intentions. 

 

A third of European businesses believe they are likely to ask suppliers for extended payment terms or pay later than terms offered. This negatively affects the development of the activity as a whole – on average, 73 days a year are lost by companies trying to deal with their overdue receivables, instead of focusing on their core business during this time. According to the report European business delays payments for EUR 10.5 trillion. This is equivalent to 30% of GDP, the sum of the gross domestic products of France, Germany and Great Britain.

Insolvencies in Europe are expected to increase. European companies are becoming more resilient to bad debt problems, and only 12% of CEOs say losses from it reduced their ability to invest in strategic growth last year. In 2021, this share was 20%. The share of companies, whose growth was hampered by problems with late payments, has decreased over the same period – by 10 percentage points to 43%.

Late payments vary across sectors. In business-to-end customer relations, the gap is now 11 days, two days more than in 2023. In business-to-business and public sector payments, the delay is 16 days, with business having a day increase compared to 2023, and in the public sector – one day reduction of the term.

Bulgaria is in the leading positions in terms of the number of days in which payments are delayed – 65 on average, the same as in Norway and Poland. The delay is the least in Ireland – only 52 days.

Although the European economy is performing better, macroeconomic conditions continue to weigh on business. Three out of five respondents do not expect a rate cut for at least another year, despite speculation that the ECB may decrease them soon. Yet, after a period of instability and a cost-of-living crisis, economic conditions in Europe are improving, with 31% of CEOs reporting an improvement in business over the past 12 months. In 2022, their share was 24%. More than half of the survey participants see a prospect for business development in the upcoming years.

High interest rates and loan servicing costs remain a challenge. Half of those surveyed worry that the high cost of debt capital could undermine their growth plans. They are equally wary of another rate hike, making them cautious about borrowing capital and planning spending. Fewer – “only” 46%, make expansion plans more carefully because of macroeconomic conditions.

In the survey 15% of business representatives said they would start requiring longer payment terms this year to cope with economic shocks and downturns. At the same time 8% consider reducing the time for payment to their customers.

The breakdown by country shows a fairly good position of Bulgaria – 30% of Bulgarian companies confirm that in the last three years their annual revenues have exceeded expectations. The performance in Croatia is similar. Before Bulgaria and Croatia, according to the survey, are only The Netherlands, Norway and Poland.

Read more news here.