European Businesses at the Verge of Historic Recession


The EU economy is forecasted to contract by 8.3% for the year 2020 and to grow by 5.8% in the year 2021.

The world was still reeling with the impact of 2008, sub-prime crisis when the coronavirus pandemic ravaged the global economy. The European economy due to the 2008 subprime crisis was affected the most, with many countries like Italy, Greece and Spain, grappling to retain their footing in the businesses. A similar picture is getting painted with the economic loss due to COVID 19. According to the “European Payment Report 2020” released by Intrum, the European businesses and operations are shaken, as many economies either had or continued to have stringent lockdown due to the pandemic.

The European Commission has forecasted the EU economy to contract by 8.3% for the year 2020 and to grow by 5.8% in the year 2021. The report by Intrum states that 38% of respondents expect the recession to severely affect their businesses. Out of the ten respondents who are surveyed, six observes Pan-European recession to be amongst the top three challenges that will thwart the timely payment by consumers in the next three months.

The President and CEO of Intrum said, “Businesses are now taking necessary steps to prepare for a recession caused by the pandemic. Decreased revenues have reduced businesses’ cash flow and increased pressure on their outgoing payments. The initial impact on the European payments landscape continues to be dramatic.

The hospitality and Leisure will have the highest impact on their business and operations post-COVID 19. An estimated 42% of the respondents in the hospitality and leisure sector say that they predict a severe impact on their businesses, which is the highest of the 11 sectors surveyed. To mitigate the effect of the recession, 38% of respondents are planning to cut costs, and 35% are trying to be more cautious about the debts.

With the COVID 19 pandemic, the process of hiring has also been reformed. Businesses are heavily scrutinizing the process of hiring new employees, as 29% of respondents are looking forward to cutting down on recruitment processes to prepare their businesses for a recession, compared to 18% in 2019.

As compared to 2019, 35% of the respondents are exercising caution while taking debts, whereas 20% of the respondents are planning to identify the segments which are already exposed to the recession. In the case of customer payments, 26% respondents are planning to apply measures for faster customer payments, with 25% of the European businesses accelerating the sales operation, and 24% aiming for increased amortization payments.

To thwart the effect of COVID-19, on business operations, 23% of the businesses are transitioning to a fixed interest rate on the company loans, 18% planning to sell-off a part of the company, and 16% inclining towards conducting the practice of Mergers and Acquisitions.


Firms under Pressure with no Relief in Sight

The report by an artificial intelligence firm Slidetrade states that after the WHO declared COVID 19 as a pandemic, the number of unpaid invoices has increased by 23% in the United Kingdom, 26% in the Netherlands, 44% in Belgium, 52% in Spain, 56% in France and 80% in Italy.


Widening Gaps in Payments

The survey observes a widening gap of payments. Nearly 46% of the respondents observe a widening gap to be the real risk in the sustainable growth of the businesses.

Businesses are moving towards alternative payment method, to avoid bankruptcy.  In the construction and real estate industry, 41 % of the respondents have opted for longer payments, to avoid bankruptcy.


Regional Overview for Payment Trends

Northern Europe

Northern Europe includes Denmark, Estonia, Finland, Latvia, Lithuania, Norway and Sweden. In this region, 41% of the respondents expect to have a severe impact of the recession on businesses, which is the second-highest after Southern Europe. The report states that the response by Swedish and Finnish are alarming, as 45% of them expects the impact of the recession to be severe. In both countries, the GDP has plummeted by 7% and 6% respectively, despite the softer lockdown.

Moreover, 16% of the northern European businesses are planning to conduct more Mergers and Acquisitions, due to the COVID 19 pandemic and is highest in entire Europe.


Central Europe

Central Europe includes countries like Austria, Belgium, France, Germany, Hungary, Ireland, the Netherlands, Switzerland and the United Kingdom. This region is observed to be less affected by the late payments, as only 22% of the debtors are paying post-due date, which is below the European average of 25%,

Moreover, 42% of respondents in Belgium says that the late-payment by debtors is not a matter of grave concern, compared to 29% across Europe. However, one of the major challenges faced by the business across central Europe is the lack of administrative efficiency. Almost 35% of the respondents cite administrative efficiency, to be amongst the top challenges regarding customer payment on time, which is highest amongst the European regions.


Eastern Europe

Eastern Europe includes Bosnia, Bulgaria, Croatia, Czech Republic, Poland, Romania, Serbia, Slovakia, and Slovenia. Here, nearly one-third, that is 31% of the businesses cites that the over-reliance on business partners for unsecured loans is going to be amongst the challenge for next year, which is the highest amongst European regions.

Moreover, 42% of the respondents state that their survival is threatened by late payments.


Southern Europe

This region includes Greece, Italy, Portugal and Spain, The region is assessed to be at the highest risk of late payment leading to recession, which will continue to rise in the future. Over 53% of the respondents say that debtors in financial difficulties will be amongst the prime challenge next year, which is highest than the European average of 38%. Moreover, nearly 57% of the businesses in southern Europe, are at the risk of an increase in late payments over the next 12 months, with Greece accounting to 35%.



As 73% of the respondents agree that timely payment if loans and debts help in maintaining trust with suppliers and partners, the researchers of the report has suggested some strategical approach, to mitigate the effect of the recession. This includes using customer-friendly technology such as credit and payment collection software for increasing the efficiency of the debt collection process, and strengthens the client trust, and encouraging a culture that demands prompt payments by suppliers.

Lastly, the larger businesses can act as role models for smaller businesses in terms of strategical approach.

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