COVID-19 forces businesses into accepting late payments

The COVID-19 crisis is forcing UK businesses to accept unfavourable payment terms, according to new research by Intrum.

The credit management group’s survey found that 80% of the UK’s businesses have accepted longer payment terms than they are comfortable with as they do not want to damage client relationships.

This is despite the fact that 44% of UK businesses described late payment by customers as threatening to their survival – up from 17% before coronavirus.

Intrum gathered data from 9,980 companies across 29 European countries covering 11 industry sectors, and its survey was conducted during February and May 2020 – before and during the COVID-19 crisis.

The group suggested that risk of pan-European recession is the main challenge facing customers paying on time over the next twelve months, according to UK respondents. Intrum’s survey revealed that 67% rank this among the top three challenges, compared with 57% across Europe, and this also increased from 50% of those surveyed before COVID-19, to 75% during the crisis.

With Europe heading for recession, Intrum also found that 42% of UK businesses expect it to have a severe impact on them, and 31% plan to cut recruitment as a result.

“The pandemic has piled pressure onto businesses in an unprecedented way and many firms do not have the flexibility to survive late payment,” Intrum UK managing director, Eddie Nott, commented

“With pressure on cashflow, timely payment is more important than ever as businesses struggle to navigate the loosening of lockdown restrictions. The long-term economic effects of the COVID-19 crisis are not yet clear, but in the short-term many UK businesses face a battle for survival.”

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