Across Europe, small businesses are struggling to grapple with getting paid on later terms by their large corporate buyers. While the topic has gained significant attention in the U.K., forcing lawmakers to address the issue with legislation, the problem is widespread across the EU.
It’s obvious that late payments can take a toll on these SMEs. But new research published Monday (May 25) shows that the problem has a widespread impact on employment and overall economic growth.
Intrum Justitia AB found that nearly one-third of EU companies said they would hire more employees if they got paid faster. That figure equates to 8 million businesses across the continent that are holding back growth because of late payments. Further, nearly one quarter of all businesses said that there is a direct correlation between late payments and the need to lay off employees.
When businesses were asked about the reasons why they were paid late, a startling 60 percent of respondents said that late payments are a deliberate strategy, a figure researchers noted applies to B2B-only companies. Deliberate late payments leads to reduced liquidity, the study concluded, which then leads to fewer jobs.
Similar to other studies on the topic, Intrum Justitia found stark geographical differences among businesses’ views of the connection between employment and late payments. Forty percent of southern European businesses, and 44 percent of Eastern European businesses, said they would hire more people if they got paid faster. Just 16 percent of northern European businesses, however, said the same.
Researchers theorized that, on the basis that there are 23 million unemployed people in the EU, faster payments for the 25 million companies involved in the survey could potentially eradicate joblessness. On more realistic terms, researchers concluded that late payments indeed has an effect on employment levels.
“Our survey indicates that 8 million companies would probably employ at least one more if they received faster payments,” said Intrum Justitia CEO and President Lars Wollung in a statement. “This example illustrates the great importance of payment issues and payment management.”