Payment practices report

November 2020: business upbeat about 2021 outlook despite challenges

Survey results for the United Kingdom

The Atradius Payment Practices Barometer is an annual survey that assesses business payment behaviour throughout the world. The survey explores a range of topics including payment terms, payment delays, credit sales and DSO (Days Sales Outstanding).

The survey provides us with the opportunity to hear directly from businesses and, this year, gives us insight into how businesses are coping with the COVID-19 pandemic and global recession.

In this report, you will find the survey results for the UK.

Stuart Ramsden,

Regional Director for Atradius United Kingdom and Ireland commented on the report

The COVID-19 pandemic arrived at a “ time when the business community in the UK was already working hard to accommodate the challenges and uncertainties posed by Brexit. For some industries, such as retail and automotive, the lockdowns and disruptions to supply chains have added further stress to sectors that were already grappling with structural challenges - migration towards online shopping and electric vehicles respectively.

The survey results indicate a degree of optimism within the business community with more than half of the firms participating hopeful that 2021 will see the domestic economy improve. Nevertheless, the next six months present a critical time for businesses. December 31 marks the end of the Brexit transition period, while uncertainty surrounding the progression and consequences of the pandemic continue to weigh heavily. Businesses will need to be prepared for further challenges and take steps to protect their receivables while also seizing opportunities to trade and grow.

Key takeaways

More UK businesses offer trade credit than average in Western Europe Nearly 60% of the total value of B2B sales in the UK currently employ trade credit, slightly higher than the 55% av- erage for Western Europe overall.

Businesses radically lengthen payment terms in response to pandemic The results of this year’s survey show a sharp change in direction. Nearly half of the respondents reported granting longer payment terms (on average up to 30 days longer) in response to the economic impacts of COVID-19.

Late payments increase by an astonishing 81% compared to pre-pandemic levels The total value of overdue invoices increased to 47%, significantly higher than last year’s 26%, and represent an average increase of 81% year-on-year.

More businesses in UK offer discounts for early payment than region as a whole As a standard business practice, more UK respondents (64%) offer discounts for early payment of invoices compared to their peers in Western Europe (48%).

Businesses largely upbeat about outlook for 2021 55% of UK respondents expect the domestic economy to improve in 2021. 50% believe customer creditworthiness will improve and 51% expect international trade to grow next year.

UK remains resolutely upbeat despite raft of negative economic challenges

Late payments have surged by more than 80% in the UK following the onset of the pandemic and the recession that rapidly followed. If that wasn’t challenging enough, the UK is also stands out among its Northern European peers as having the highest GDP contraction. A further complication concerns ongoing uncertainty connected to Brexit. Yet despite such negative indicators, around half of the respondents to the Payment Practices Barometer survey were upbeat in their outlook towards both the domestic and global economies. This could in part be related to the fiscal measures put in place by the Government to support businesses during the pandemic.

In addition, this year’s Payment Practices Barometer survey has revealed some interesting trends and opinions among the businesses we spoke to. Benchmarking the results against last year, it is apparent that many businesses in the UK adapted their approach to credit in order to increase their competitiveness within an increasingly difficult market. The clearest example of this is the fact that none of the businesses we polled last year offered credit terms of 90 days or more, whereas 4% did so this year. Average payment terms increased to 33 days, up from the 20-day average last year. The next six months will be a critical time for businesses in the UK as they navigate the December 31 deadline for Brexit transition and will have a clearer insight into the longevity of the pandemic and its economic consequences.

United Kingdom: top 5 challenges to business profitability in 2021

If you have any questions about protecting your receivables send us a message so we can try and address your specific needs.

Share this article