European Companies Write Off Half A Trillion Dollars Due To "Culture Of Late Payment"

Tyler Durden's picture

40% of European firms say the severity of late-payment problems were preventing them from hiring as "even when the public sector pays promptly, the money doesn't sloosh down the system promptly because of the culture of late payment." As the FT reports, small and medium-sized enterprises are the hardest hit by late-payment consequences with nearly three-quarters saying nothing has changed in the last few months and in fact nearly half saying the problem is getting worse. "The late payment consequences for businesses pose a real threat to Europe’s competitiveness and social wellbeing," warns one analyst, as "companies are deliberately not sticking to the provisions of the EU directive as a way of managing their cash flow." The reason - of course - the unintended consequences of policy-makers centrally planned efforts to ensure nothing bad ever befalls an important firm/nation ever again - "It's a way of borrowing off smaller companies – and they should be held to account."

 

As The FT reports,

The debt written off by Europe’s companies due to late payment or non-payment of bills has swelled to €360bn despite the pick-up in economic activity in the region.

 

“The late payment consequences for businesses pose a real threat to Europe’s competitiveness and social wellbeing,” said Lars Wollung, president of Intrum Justitia, a credit management group. “Hardest hit by the problem . . . are small and medium enterprises.”

And it's not getting any better...

Nearly three-quarters of the companies taking part in the research said that there had been no improvement in the late payments problem in the past three months despite the economic pick-up, and 46 per cent believed late and non-payment risks were actually increasing.

 

“Even when the public sector pays promptly, the money doesn’t sloosh down the system promptly because of the culture of late payment,”

 

Forty per cent of the companies which took part in the EPI research said the severity of late payment problems was preventing them from hiring staff.

Of course, it's the smaller business that suffers as the trickle-down of government intervention suckles large enterprise and they squeeze small business...

Suppliers are often unwilling to go public about late payment problems for fear of jeopardising relationships with their most important customers.

 

...

 

A 2011 EU directive, which has been adopted by 27 out of the 28 member states, sets limits on how long public and private sector companies can keep their suppliers waiting – 30 and 60 days respectively.

 

Although the directive has been adopted by the UK government, that does not mean large companies stick to its provisions. UK retailer Marks and Spencer, for example, changed its supplier terms last September to extend its window of payment from 60 to 75 days.

 

“Companies are deliberately not sticking to the provisions of the EU directive as a way of managing their cash flow,” said Mr Fisher. “It’s a way of borrowing off smaller companies – and they should be held to account.”

But then again - so what - there appears no consequences anyway...