* European businesses forced to write off 3 pct of
* Late payment hitting southern Europe harder than the north
* Business confidence down across Europe
* European Union legislation not enough to help smaller
By Clare Hutchison
LONDON, May 13 European companies lost 350
billion euros ($450 billion) last year due to late or unpaid
bills, underlining fears that small businesses expected to drive
economic recovery are faltering in a prolonged recession.
The figure amounted to 3 percent of all receivables and was
a 7 percent increase on 2012, when companies wrote off 340
billion euros, Swedish credit management services group Intrum
Justitia's European Payment Index showed on Monday.
Against the backdrop of the economic downturn and restricted
bank lending in Europe, experts fear that the mountain of unpaid
bills will drive up insolvency and job losses, reduce
cross-border trade and snuff out any recovery.
Late or non-payment for services has long been a problem for
Europe's smaller companies, especially in businesses such as
supermarkets, which are renowned for driving hard bargains and
The Forum of Private Business (FPB), a British-based
organisation that supports small and medium enterprises, last
year outed supermarket chain Sainsbury on its late
payment "Hall of Shame" for stretching payment times to 75 days.
Pharmaceutical giant GlaxoSmithKline received the
honour in February for pushing the wait to be paid to up to 95
"It is bad news for the recovery... If a company is a late
payer to another then that second company presumably has cash
flow issues of its own, which transmits around economy," said
Philip Shaw, an economist with Investec.
"It may be that the index is highlighting the need for
government action to try to prevent those contagion effects from
taking hold," Shaw added.
The index, based on a survey of 9,800 companies in 29
countries in Europe, reflected the gap between economies in the
north and those in the south.
Businesses in Greece, Cyprus, Hungary and Portugal were
among the most at risk from the effects of late or unpaid bills,
while Nordic nations, along with Germany, Switzerland and
Austria, were least in danger.
However, Lars Wollung, president and chief executive of
Intrum Justitia Group, a credit advisor, debt collector and
financial services firm, said weaker confidence indicated a
bleak outlook for the whole of Europe.
The payment index showed that even in Germany, some 30
percent of German businesses said they expected to face greater
risks from late payment in 2013, a 33 percent leap compared to
21 percent from a year ago.
"If business society says it's going to be worse, they plan
for it to be worse and if they plan for it to be worse it's
going to turn into reality," Wollung said.
Already just under half of the businesses surveyed said they
had cut back on investments in innovation and saw no organic
growth in their business on the horizon.
"Both Germany and the Nordics are exporting to Europe so if
most of Europe will have worse problems than today then it most
likely will hit (those) countries in a substantial way," he
While the amount of money lost to bad debt has risen, the
average time businesses waited to receive payment edged lower,
the data showed.
The European Union's Late Payment Directive, which from
March required that bills are settled within 30 days in the
public sector and 60 days in the private, may have forced
companies to pay their bills more quickly.
However, the directive does not do enough to address the
power balance between big business and their smaller suppliers,
said Robert Downes, a spokesman for the FPB.
"You have big business trying to renegotiate the terms of
invoices anyway ... companies don't like to say no for fear of
losing that lucrative contract," he said.