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Eurozone Recession Straining Cash Flow of Eastern European Businesses

Payment defaults in Eastern Europe rose to 3% of total invoice value over the past year

Cash flow levels of Eastern European businesses are heavily influenced by the weak economic conditions in the Eurozone. Overall, this has the effect of slowing trade and triggering insolvencies. According to the June 2013 Atradius Payment Practices Barometer, on average, B2B payment defaults in Eastern Europe rose to 3% of total invoice value over the past year. Businesses in the region are therefore concerned about maintaining adequate cash flow levels. Along with falling demand for products and services, this could weaken Eastern European businesses prospects for growth and profitability this year.

The Atradius survey interviewed 820 companies across 4 countries in Eastern Europe (Czech Republic, Hungary, Poland and Slovakia). These countries have been negatively impacted by the economic problems of neighbouring Eurozone countries. This has resulted in a marked increase in the average value of long overdue receivables, particularly on exports, which rose to 4.7% from 3.6% last year.

The growth in late payments has also contributed to the increase in the value of receivables write offs. The average total value of foreign B2B receivables written off as uncollectable by survey respondents increased 44.4% to 2.6%, and that of domestic write offs grew 38.5% to 3.6%.

As observed in the 2012 survey, the buyer's financial limitations remain the primary reason for payment delays. This was most evident in Hungary in respect of domestic payments (88.2% of respondents) and in Slovakia in respect of foreign payments (68.3%).

The rise in the value of invoices extending more than 90 days past due and in payment defaults is also limiting the ability of businesses to pursue opportunities. For the majority of Eastern European respondents, falling demand for products and services and maintaining adequate cash flow are the biggest challenges to business growth and sustainable profitability. Slovakian respondents (48.5%) appear to be the most concerned about maintaining adequate cash flow this year. Polish respondents (39.0%) are most concerned about the impact of falling demand of products and services on the business.

Chris van Lint, Chief Risk Officer of Atradius, commented, "Slow moving Eurozone economies are causing increased payment delays and payment defaults for businesses in Eastern Europe, particularly for those that rely heavily on exports to countries with weak economies. We expect the positive impact of an anticipated economic recovery later this year to be limited. Sustained improvement in payment behaviour is not expected until the 2nd half of 2014 or 2015. In either case, diligent management of trade credit risk and protecting your business from payment defaults are essential to maintaining the financial health of your company."

The complete June 2013 edition of the Atradius Payment Practices Barometer focussing on Eastern Europe can be found in the Publications section of the website.

About Atradius
The Atradius Group provides trade credit insurance, surety and collections services worldwide. With a presence through 160 offices in 45 countries, it has a market share of approximately 31% of the global trade credit insurance market. Atradius has access to credit information on 100 million companies worldwide. Its products help protect companies throughout the world from payment risks associated with selling products and services on credit.

Lundi 1 Juillet 2013