We have been in contact with Bernt-Olof Hellgren (the picture) at the business company Dun & Bradstreet about the payment patterns that D & B sees around the world. In all regions where D & B are present (more than 200 countries) they have noted a higher frequency of late payments, with the greatest deterioration in Western Europe (which was also the case in Q4 2008).
Europe's harsh economic views with continued tight lending and a sharp increase in the number of insolvencies among companies have increased payment risks. In the meantime, payment behavior deteriorated even further in developing markets, despite a recovery in commodity prices due to low access to trade finance.
Below Bernt-Olof Hellgren gives here a summary of the different parts of the world.
Western Europe
The percentage of payments made by companies, 30 or more days after the agreed payment terms was 30.1 percent during the year up until Q1 2009, which is a bit higher than the 28.5 percent registered in 2008.
Corporate profits have fallen sharply since the second half of 2008, which contributed to a sharp increase in insolvencies. In addition, bank lending remained subdued, despite falling interest rates and an increase in money supply. Consequently, the payment delays have become more widespread, particularly in Britain, Belgium and Spain.
In the UK the retail sector has continued to suffer from weak consumer lending and rising personal bankruptcy levels. At the same time, the problems in the Belgian financial sector have undermined the country's payment results in Q1, and the export-oriented businesses have been affected by decreased global demand.
The financial crisis has particularly affected the Spanish labor intensive sectors (including construction and retail). In comparison, relatively unchanged payment behavior was recorded in France and Germany in Q1.
Asia & the Pacific region
The percentage of payments made by companies more than 30 days late was 26.5 percent in the year up until Q1 2009, which exceeds the 25.7 percent registered in 2008.
The region has been hit particularly hard by the downturn in global demand, and many of the export-oriented economies are experiencing a collapse in exports and production.
In Vietnam, China and Singapore the most significant deterioration of ability to pay were recorded. In China, exports decreased by around one fifth compared with Q1 2008, with particular problems for airlines, cars, furniture, real estate, steel industry and toy industry.
North and South America
The percentage of payments made by the company at least 30 days late was 35.9 percent in Q1 2009, which exceeds the level of 35.5 percent registered in 2008. The impact of lower commodity prices has continued to adversely affect the solvency of the entire region, especially in Brazil, Colombia, Peru and Venezuela.
Commodity prices have recovered, compared with the end 2008/early 2009 (perhaps temporary, due to China's stock strategies), but lower domestic liquidity, and also the cash flow constraints continue to adversely affect importers' ability to pay.
In Mexico, payment delays increased since Q2 2008, as exports, investment and production decreased. A recent extension of credit with the IMF will facilitate part of the country's impending payment problems, but the uncertainty in global commodity markets will continue to affect ability to pay as elsewhere in the region.
Eastern Eurpoe
The percentage of payments made at least 30 days late was 24.3 percent in Q1 2009. Despite a significant improvement in Poland, which emphasizes the resistance, payments in the region continue to deteriorate.
Middle East
The percentage of payments made by the company at least 30 days late was 38.6 percent in Q1 2009, which exceeds the 38.3 percent registered in 2008. Overall in the region, we saw stabilization in ability to pay in Q1.
But in Israel we see deterioration. Although the payment behavior of Israel continues to develop favorably compared with the regional average, we expect that payment behavior remains weak in the upcoming quarters, as exports to the U.S. and Europe is declining and corporate profits decreases.
Cecilia Helland