Business in Germany is showing a significant decrease in risk appetite, according to the report of the international company Coface (France), one of the world leaders in the field of risk insurance for trade loans, according to a survey of 753 German companies of various sizes.
The survey was conducted to find out how the crisis affected the payment discipline of the corporate sector of the largest EU economy, which in many ways “sets the tone” for the eurozone market as a whole.
“If in 2019 81% of respondents in Germany were ready to provide a deferred payment to their counterparties, this year it is only 62%. At the same time, half of the entrepreneurs who provide a deferral are ready to wait for payment no more than 30 days. The average duration of the deferral is for the year fell from 37 to 34 days “, – according to insurance experts according to the study.
In general, the German market is pessimistic about the prospects for 2020, the position is waiting. “The overwhelming majority of respondents said during the survey that by the end of the year their profits will significantly decrease. Nevertheless, in 2021, almost all survey participants plan to return to growth,” Coface analysts state.
Moreover, during the crisis, the payment discipline of German enterprises not only did not worsen, but even improved. So, if in 2019 85% of companies faced delays at least once, then in 2020 only 68%. Coface analysts explain this dynamics by the fact that corporate buyers have switched to an “anti-crisis” regime and are trying to minimize the number of uncertainties in their activities. “High market turbulence and the risks of cash gaps due to the pandemic crisis are pushing debtors to pay off their trade loans more quickly in order to avoid delinquencies and avoid possible claims from their suppliers, which in the worst case may require the initiation of bankruptcy proceedings for the defaulter,” experts comment survey data.
The dynamics of payment discipline varies greatly from sector to sector in Germany, Coface notes. “If in the pharmaceutical industry the average duration of payment delays has decreased by almost a week compared to last year (up to 27 days), then, for example, in the information and communication technology industry it has grown by almost two weeks (from 34 to 47 days), and in the automotive industry, the most pessimistic sector at the time of the study, for 20 days (from 22 to 42), “the insurer cites the survey data.
Three out of four exporters surveyed named the pandemic crisis and the associated quarantine lockdowns as a major risk to their business. One of the most significant foreign trade risks of the past year – the “tariff war” between the US and China – this year worries only 2% of German enterprises (20% in 2019), Coface notes.
The focus of business has noticeably shifted from foreign markets to domestic. So, in 2019, the national market was the target for 81% of respondents, 57% of enterprises focused on the EU market, and 11% on the American market. This year 91% of the surveyed companies named German as one of the three most important sales markets, American – only 6%. The Russian market is one of the key ones for 4% of respondents.