Select European National Payment Trends in Construction, ICT Sectors

Public buyers are exhibiting poor payment behavior in the otherwise flourishing German construction industry, while overdue payments in Poland are dragging back the nation’s otherwise rebounding construction sector.

In a series of recent reports, trade credit insurer Atradius gauged payment behavior in a smattering of nations and industry sectors. In Germany, for instance, the German Builders Association anticipates turnover growth to reach 3% in 2016 or some 103 billion euros. Those estimates coincide with a few positive payment trends in the German construction sector. Cases of payment defaults decreased again in 2015 with increasing demand and stable profit margins, and Atradius analysts expect the trend to continue this year. Still, average payments in the sector are about 45-50 days, with public buyers exhibiting the slowest payment that is straining suppliers’ liquidity.

In the Polish construction sector, average payment is at 75 days, Atradius said. This timeframe has been prevalent in the sector for the past two years. “General contractors often transfer costs to subcontractors by delaying payments,” Atradius added, while overdue payments of up to 30 days remain the norm. The nation’s National Debt Register said in March it recorded $352 million in construction companies’ debts, which represented an increase of some $83.5 million since September 2015. Atradius thus expects insolvencies in the industry to remain high this year.

In England, data centers and cloud computing, along with mobile apps and wearable technology development, are contributing to a strong sector, Atradius said. The information and communications technology (ICT) sector’s value-added growth is expected to reach 3.4% this year and 4.4% in 2017, for instance. Payments on average for the English sector are around 60 days, while the number of nonpayment cases hasn’t grown in the past year, and Atradius expects this trend to carry on into the near future. Further, insolvencies are few and far between and should stay low this year.

In Russia, the ICT sector is being hampered by the overall poor performance in the domestic economy. This year, Russian ICT sector growth should decrease by 2.1%, but rebound to positive territory (0.7%) in 2017, Atradius predicted. Payments in the Russian sector vary wildly, from 30 to 120 days, depending on the level of supply chain and market leverage of the business. Meanwhile, nonpayment notifications and insolvencies increased in 2015 and are expected to continue this year. Small and midsized electronics/ICT wholesalers and retailers have been hit the hardest in terms of late payments and insolvencies.

- Nicholas Stern, editorial associate

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