Vaccine rollouts powered the global economy with optimism. Nevertheless, uncertainty is still present in the corporate world. There is a lot of worrying data on payment terms in Europe. Late payments are rising and so are write-offs. The global economy is expected to prosper in 2021 but its recovery is yet dependent on how the pandemic will be managed. As financial sector seems bulletproof, there is still a lot of unknowns for non-financial companies – and we all understand the domino effect that follows.

Payment Discipline in Europe

2020 was probably one of the toughest years for businesses around the world. Work from home, infected employees, forced shutdowns were just some of the many challenges companies had to overcome in order to stay afloat. The most important challenge for the majority was ensuring short-term liquidity. Part of the liquidity problems was solved by state intervention and with help from banks, the rest of the puzzle was and still is being solved by trade credit.

According to a publication published by a trade credit insurance company Atradius, payment terms were lengthened by an average of 12 days in Western Europe. Meaning, that the average payment term in the region was 46 days in 2020, while in 2019 the average payment term was 34 days. In 2020, the Eastern Europe payment discipline was far worse compared to Western Europe. Payment terms were lengthened by an average of 30 days across Eastern Europe. Even though that payment terms were and still are longer, we can observe a rise in trade credit defaults across the entire Europe. Atradius survey shows that approximately 45% of B2B issued invoices remained unpaid in Eastern Europe after the due date – a surge of 88% in comparison with the pre-pandemic levels.

A rise in protracted payments can also be observed in Western Europe. There, late payments have risen by 62% on average, resulting in 29% of the issued invoices to remain unpaid after the due date. Write-offs in Western Europe have risen and now present 7% of the total invoice volume whereas the pre-pandemic write-offs stood at 2%. Similar increase can be observed in Eastern Europe, where write-offs have risen from 1% to 6% of the total issued receivables.

Solvency pressure still remains limited in the financial sector. Unfortunately, this does not hold for non-financial corporations according to the International Monetary Fund (IMF). Default rates in large non-financial corporations reached their peak in April 2020 and have since been falling. However, challenges still remain. According to S&P Global, number of companies with a negative outlook (rated BBB-) has tripled globally since the beginning of the pandemic. Furthermore, the potential for further downgrades is elevated in the EU and in the US.

Economic forecast

Even though the world was extremely surprised by the positive news of COVID-19 vaccine approvals which fuelled hope and positivity in the global economy, new variants and rising numbers had risen new concerns of the outlook. In case vaccination goes as planned and with effective policy support, IMF projects global economic growth of 5.5% in 2021 which will still not bring us back to the pre-pandemic levels. As already stated in our article Optimistic too soon? growth will be powered by China, the US, Japan, and larger European countries. Global trade volumes are expected to grow 8% in 2021. Swift trade growth is expected mostly in merchandise volumes while service trade will most probably have a slower pace of growth due to imposed travel restrictions.

As always, nothing is certain. Business world might have defeated the COVID-19 virus, but there is yet a lot of unknowns. Will the vaccination go as planned? How will economies that are not first in line for the vaccine recover and how will this effect global supply chains? Lastly, we must not forget corporate zombies that are still on the rise in Europe and in the US as well. Their collapse could wipe hundreds of thousands of jobs and leave creditors empty-handed. This could probably seriously affect what currently seems a bulletproof financial sector.

Companies should therefore closely monitor their debtors and analysing a few ladders up the supply chain might also be wise. Firms could additionally or better – firstly, protect their exposure by implementing trade credit insurance which can entirely mitigate the credit risk and disburden the financial department from constantly monitoring debtors. Trade credit insurance is also a good tool for entering new and unknown markets as most of the risk assessment is done by specialised risk underwriters in the insurance companies.

For more information on trade credit insurance and its extensions feel free to contact us at or give us a call at +386 (0)1 292 60 96.

This article was written by the team at ALPHA CREDO


International Monetary Fund (IMF) (2021). Global Financial Stability Update. Available here

Atradius Collection (2020). Eastern Europe: region faces 2021 battered but hopeful. Available here

Atradius Collection (2020). Western Europe: 2021 offers hope to COVID-hit markets. Available here