Europe must do better to combat late payment

“Job creation and better regulation are two main EU challenges today. Payment made on time is a crucial prerequisite for the survival of all businesses, especially small firms and entrepreneurs,” said Leif Hallberg, public affairs director at Intrum Justitia Group, when he presented the results from the 2005 European Payment Survey in Brussels today. He added that, “Europe must do better to counter the negative late payment habits." The latest pan-European business survey carried out by Intrum Justitia, Europe’s leading credit management services company, reveals that the existing legal enforcement procedures do not sufficiently meet the needs of combating late payments. In fact further measures are required. National governments also have a vital role to play in improving legal enforcement procedures as well as to more effectively implement EU directives such as the Late Payments Directive. • Bankruptcies: One in four insolvencies is due to late payment. • Unemployment: 450,000 jobs are lost each year as a result of these bankruptcies. • Small and Medium Enterprises (SMEs) are particularly hard hit by late payment. They are more vulnerable to variations in cash flow, they often rely on a limited number of customers, and they are frequently suppliers to large firms who are known to delay payments to a greater extent than smaller companies do. SMEs are on average owed twice as much trade credit as they themselves owe to larger businesses – the balance is an ‘interest free loan’, which SMEs grant or rather are forced to grant to larger businesses. • Governments set the worst example as late payers. The 2005 European payment survey shows that governments’ payment delay is nearly double that of business to business (B2B) or business to consumer transactions (B2C). • Late payment is intentional in the majority of cases, according to the survey explaining that companies prefer paying late as a means of refinancing as opposed to applying for bank loans. • Following EU enlargement, Portugal and Greece are no longer the only worst payers in Europe. High payment risks have also been recorded in some of the new EU Member States, such as the Czech Republic, Cyprus, Lithuania and Poland. The complete European Payment Index Report 2005 can be obtained by order from Intrum Justitia AB, SE-105 24 Stockholm, Sweden, or by telephone +46 8 546 10 204. Additional information available on www.europeanpayment.com For further information, please contact: Leif Hallberg, Director of Public Affairs Tel: +46 8 546 10 207 Mobile: +46 702 340 207 E-mail: l.hallberg@se.intrum.com