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Companies wrote €312 billion of debt from their books over the last twelve months – a 3% increase on the previous year, and more than the €275 billion EU rescue granted to Greece, Portugal and Ireland – according to Intrum Justitia's survey.
The Stockholm-based credit management group's survey of 6,000 European businesses showed a varying picture across the continent, with Germany seeing its corporate write-offs decrease by 8%, whereas in the UK bad debt increased by a third.
According to the poll, 28% of companies – rising to 55% in the UK – see late payments as a threat to survival, whilst 45% see them as a block on growth.
Public sector worst offenders
Companies write off debts when they believe that they can no longer be paid, though there is an element of discretion involved.
Lars Wollung, Intrum Justitia's CEO, said: "In Germany companies moved fast in response to the crisis to write off their bad debts and clear their books in readiness for recovery; in the Mediterranean countries companies have not yet faced up to their bad debts."
Wollung said it was necessary for the public sector – "which has the funds" – to pay its debts more promptly, in order to free up capital and prevent companies from writing off debts or bankruptcy.
Luc Hendrickx, director of enterprise policy at the European Association of Craft, Small and Medium-Sized Enterprises (UEAPME), said: "Public authorities are the worst payer in Europe timewise. With all the recent talk of economic stimulus, and at a time when businesses are clearly struggling, governments could inject billions in their economies by simply paying private enterprises promptly."
Late Payments Directive to the rescue?
Under the European Late Payments Directive – which comes into force in March 2013 – public institutions and companies will be required to pay bills within 30 days, although business-to-business contractors may agree to exclude themselves from the condition.
The Index revealed extremely low business awareness of the directive: France, Spain and Italy were the only EU member states where more than 40% of businesses had heard of the new rules.
A senior European Commission official told EurActiv that the executive planned to launch an awareness-raising campaign next year in co-operation with member states' chambers of commerce, to inform SMEs and other companies what tools will be available to chase payments.
The official also warned that – although the directive contains the right for business-to-business contracts to be excluded from the late payment provisions – "that does not mean that we do not care about payments provisions in these contracts".
He added: "The Commission will be looking out for abusive clauses, such as where companies insist that payment need not be made for between 200 and 300 days […] and will take action if necessary."
Jeremy Fleming





