The number of overdue payments experienced by U.K. businesses reached a two-year high in fourth-quarter 2015, according to Euler Hermes. The trade insurer's March 9 report, U.K. Late Payments Hit Two-Year High at 2015 Year-End, finds that 14 of the 17 major industry sectors it covers reported increases.
The firm’s quarterly report analyzes data from 250,000 U.K. corporate clients for payment incidents, which include late or delayed payments, default, insolvency, country court judgments or credit insurance claims. The number of firms that reported delayed debtor payments rose 12%, from October to December 2015, compared with the prior quarter. This was the highest level for eight consecutive quarters. In addition, one in six companies said it had difficulty making timely payments last year, up from 10% in 2014.
Construction companies registered 31% of all payment incidents reported—the most for any sector. “Overdue payments are not particularly unusual in a sector where disputes are often partly to blame for delays,” Euler Hermes said. “However, the sector suffered a 27% year-on-year rise in the number of overdue payments incidents in 2015, as some firms toiled with low-margin contracts secured during the last recession.” Subsectors affected the most included general contractors, civil engineering providers and installers of wiring and fittings.
The U.K.’s automotive and electronics sectors reported payment issues fell by 12% and 15% year-on-year, respectively. “However, there were significant increases across the metal and chemicals industries as they struggled to cope with falling European demand and the China slowdown: 2015 payment issues were up 28% and 13%, respectively, versus 2014,” the firm said.
“While some UK industry sectors have seen reductions in overdue payment incidents, insolvencies are set to rise 5% this year, and average day sales outstanding is expected to edge up to 56 days,” said Dirk Kotze, head of risk underwriting at Euler Hermes U.K. “The start to 2016 has seen increased volatility, so companies need to remain vigilant.”
Euler Hermes’ data suggest “challenging times ahead, so firms should tread carefully when offering open credit terms on new contracts or to new customers,” said Valerio Perinelli, CEO of Euler Hermes U.K
- Diana Mota, NACM associate editor