Quarterly non-payment review

In conjunction with Coface, Europe’s largest credit insurance company, Financial Director continues its quarterly review of corporate non-payment in the UK and Europe.

Non-payment should be distinguished from insolvency. The figures show the trend in companies not paying their bills, rather than companies going bankrupt, and may be regarded as a lead indicator of economic activity – or the lack of it. The graphs measure notifications of non-payment as a percentage of Coface’s commitment in each country. The figures are six-month moving averages, and will be updated on a regular basis.

Overall, German non-payment has moved closer to the European average, and the low levels in October and November seem exceptional. The lower level of the deutschmark may help exports, but prospects for 1997 are not optimistic.

The overall level of non-payment has increased, especially in garment manufacturing, building and construction. Consumption is low and, despite government grants, insolvencies of large businesses remain possible.

There was a stable and falling trend in 1996, consistent with the improvement in the UK economy. Receiverships were at their lowest for seven years. But future rises in interest rates and political uncertainty may be reflected in a deteriorating picture over the months ahead.

The late payment situation has worsened during 1996 and the prospects for 1997 are pessimistic, mainly due to the revalued lire. High tax rates and high rates of unemployment are also depressing domestic demand. The worst sectors remain textiles and meat products.

The overall picture would look good but for four isolated cases during 1996. The Spanish economy remains fragile and heavily reliant on foreign investment. But the prospects for 1997 are optimistic.