Atradius economists predict a decline in global GDP of 4.3% in 2020. This means the negative impact of COVID-19 is bigger than that of the financial crisis during 2008/2009. Risks to the current forecast are to the downside as many countries are tightening quarantine measures to deal with a resurgence of infections and insolvencies are expected to accelerate.
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Although the economic impact of the 2020 pandemic has been severe and swift, the latest Atradius Payments Practices Barometer survey results for Europe shows a region battered, but not beaten by the virus. However, the pandemic has plunged the Eurozone into recession and businesses may need more government intervention next year.
Every country polled in the region reported an increase in late payments and lengthening of DSO compared to pre-pandemic levels. The UK and the Netherlands reported year-on-year increases in overdue invoices of 81% and 75% respectively. Eastern Europe reported an average increase of 88%. A significant percentage of businesses reported a negative impact on cash flow and revenue, particularly in Bulgaria and Slovakia.
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Clear new trends have emerged with businesses altering their payment practices in response to the economic downturn. Many businesses increased payment terms. The majority did so in a bid to increase their competitiveness and encourage sales. However, a sizeable proportion reported providing credit to support their customers with short-term finance.
Despite a dramatic surge in late payments and a substantial number of businesses reporting liquidity stress, business confidence is largely buoyant. Although many countries are now entering a second lockdown, significant numbers of businesses are optimistic about the outlook for next year.
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