Late payment of bills by Europe’s public sector hurting construction, healthcare and education industries, slowing job creation
Intrum Justitia European Payment Index 2014, Industry White Paper:
"Late Payment Directive can make significant contribution to lowering unemployment!”
- Europe’s construction industry sees just 51% of invoices settled within 30 days. Similarly, only 59% of healthcare industry are paid within a month, according to a new Industry white paper based on Intrum Justitia’s European Payment index 2014.
- Construction, Education and Healthcare businesses all report late payment is having a negative impact on their ability to keep or employ people. One out of two businesses in Construction and Education state late payments contributed to them not hiring.
- “These are businesses largely dependent on public sector customers. The public sector pays generally later than private businesses and consumers. The good thing is that the implementation of the EC Late Payment Directive has the potential to make a big positive difference to unemployment figures. Its implementation is vital to Europe’s future success!”, says Lars Wollung, CEO & President of Intrum Justitia.
- Payment durations, bad debt losses and liquidity consequences differ substantially between industry sectors. See below for both overall European industries.
Construction businesses suffer most from late and non-payments. Some 53 percent of construction-related credit managers reported that late payments has a high impact on the company’s business risks. A staggeringly-high 64 percent said that late and non-payments prohibit growth of their company, according to the European Payment Index from credit management service firm Intrum Justitia. Intrum Justitia today released an Industry white paper focusing on Europe-wide payment indicators sector by sector.
The paper reveals a strong correlation between employment and late payments in the construction, education and healthcare industries. In construction and education, fifty percent of businesses report that due to late payments they have ceased hiring new employees; and almost as many businesses claim that late payments have led to them dismissing people (39 percent of construction businesses and 45 percent of education businesses).
“These business sectors have many public sector customers, which we believe is a key reason why they suffer greater liquidity problems than other sectors. The average payment duration from public sector clients is 58 days, while private businesses pay after 47 days on average – and consumers after 34 days! Even worse, the healthcare industry, which is very dependent on the public sector, suffer from late payment more than other business with an average delayed payment time of 71 days”, said Lars Wollung, CEO & President of Intrum Justitia.
“The good news is that late payment is now on the radar of public policy makers due to the introduction of the Late Payment Directive. I really hope we will see postive results being delivered from the directive’s implementation in next year’s EPI survey of the construction and health care industries. Properly implemented, the directive has the potential to halt the current falling job figures in these sectors – and hopefully, start turning them positive”, said Lars Wollung.
Utilities, manufacturing and transport businesses are the industries suffering least from late payments and bad debt losses. The written off percentages vary between 2.1 and 2.3 percent, compared to 4.0 percent in the construction industry.
For more on the payment durations and correlation to hiring employees, sector by sector, see below from European Payment Index 2014 industry white paper.
Industries | Total payment duration (actual) / EU averages | ||
B-2-C | B-2-B | Public sector | |
Days | Days | Days | |
Business services | 32 | 46 | 49 |
Construction | 39 | 56 | 65 |
Education | 37 | 45 | 45 |
Utilities | 32 | 43 | 47 |
Financial Services | 33 | 46 | 41 |
Health sector | 42 | 59 | 71 |
Leasure/hotels/rest | 24 | 34 | 41 |
Manufacturing | 35 | 59 | 54 |
Media | 35 | 53 | 56 |
Professional Services | 33 | 45 | 52 |
Real estate | 26 | 38 | 38 |
Retail and wholesale | 30 | 43 | 47 |
Telecommunications | 29 | 48 | 55 |
Transport, storage, comm | 29 | 45 | 48 |
Industries | Consequences of late payment / EU averages | |
Dismissing employees (%) | Not hiring new (%) | |
Business services | 14 | 25 |
Construction | 39 | 49 |
Education | 45 | 48 |
Utilities | 12 | 26 |
Financial Services | 11 | 34 |
Health sector | 21 | 38 |
Leasure/hotels/rest | 15 | 29 |
Manufacturing | 24 | 33 |
Media | 15 | 35 |
Professional Services | 12 | 36 |
Real estate | 26 | 41 |
Retail and wholesale | 13 | 34 |
Telecommunications | 13 | 29 |
Transport, storage, comm | 16 | 31 |
About Intrum Justitia
Intrum Justitia is Europe’s leading Credit Management Services (CMS) group, offering comprehensive services, including purchase of receivables, designed to measurably improve clients’ cash flows and long-term profitability. Founded in 1923, Intrum Justitia has some 3,600 employees in 20 markets. Consolidated revenues amounted to SEK 4.6 billion in 2013. Intrum Justitia AB is listed on NASDAQ OMX Stockholm since 2002. For further information, please visit www.intrum.com
About the EPI Industry White Paper
The EPI 2014 Industry White Paper from Intrum Justitia reveals how Europe’s economic health is impacted as companies battle late payment and bad debt, a development that in the end slows job creation, business growth and technology investments and innovation. The significant difference in debt loss and payment delays being suffered by different industry sectors on a European level is highlighted in this white paper. The first EPI industry white paper was issued in September 2008.
For more information
Madeleine Bosch, Head of EPI Research, Intrum Justitia
Tel: +31 64 6212 579
Email: m.bosch@intrum.com
Annika Närling, Acting Communications Director
Tel: 08-546 102 04
Mobil: 076-789 24 04
Email: a.narling@intrum.com