The risk of late payment or even non-payment of an invoice is increasing sharply this year. More than half of European exporters (60% in Germany) foresee an increased risk of payment default. This is what emerges from the study conducted by the world leader in trade credit insurer, Allianz Trade.

“Optimism about the economic recovery after the pandemic was shattered by Russia’s invasion of Ukraine. Consumers are showing unprecedented pessimism about the economy. The confidence of producers is also systematically shaken. Companies are really starting to feel the consequences of the war, which never ends. Thus, 56% of the exporters we spoke to are deeply concerned about the persistence of high energy prices. Rising commodity prices and increased financing costs, along with prolonged disruptions in the supply chain will result in higher export costs over the coming months,”
says Johan Geeroms, Director Risk Underwriting Benelux at Allianz Trade.

Three thousand exporters in the United States, China, United Kingdom, France, Italy and Germany were surveyed in the 2022 Allianz Trade Global Survey. Two surveys were actually conducted, the one before the invasion of Ukraine and the other after.

Three trends stand out:

  • More and more companies are preparing for the worst in terms of their turnover this year
  • Companies fear a structural drop in demand as the conflict drags on
  • Fear of defaults of payment
Geeroms: “For many years, the authorities have thrown businesses a lifeline. It would seem that this generous help from the authorities will not be available this time. Companies now have to fend for themselves, as they have not finished overcoming the consequences of the Covid-19 pandemic. »
“This year, we expect a +10% increase in the number of business bankruptcies in the main European export markets. Nothing could be more logical, in fact, given the number of companies in a precarious situation that have been able to remain operational thanks to public aid. This rehabilitation is beginning to crumble. »
Geeroms predicts a major economic recession. “Due to rising costs for purchasing raw materials and energy, as well as escalating payment defaults, companies need more and more working capital to remain operational on a daily basis. In other words, they have less money left to take structural actions that determine their future, such as new product development, buyouts, growth, modernization or debt reduction. »
According to Johan Geeroms, the performance of companies in the coming period will fundamentally depend on their ability to pass on rising costs to the end customer. “What is called pricing power varies greatly from sector to sector. For many European companies, increasing prices in the short term is not an option. The profit margin is thus under pressure. Namely a decrease in profits, investments and growth. Invoices remain unpaid longer or are not paid at all, thus compromising working capital." In the eyes of Geeroms, a wave of bankruptcies is simply the logical consequence.

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