Late pay hurting smaller players

European companies lost 350-billion euros last year due to late or unpaid bills, underlining fears that the small businesses expected to drive economic recovery are faltering in a prolonged recession.

The figure amounted to 3% of all receivables and was a 7% increase on 2011, when companies wrote off à340-billion, Swedish credit management services group Intrum Justitia's European payment index showed yesterday.

Against the backdrop of the economic downturn and restricted bank lending in Europe, experts fear that the mountain of unpaid bills will drive up insolvency and job losses, reduce cross-border trade and stifle recovery.

Late or non-payment for services has long been a problem for Europe's smaller companies, especially in businesses such as supermarkets, which are renowned for driving hard bargains and squeezing suppliers.

The Forum of Private Business, a UK-based organisation that supports small and medium enterprises, last year exposed supermarket chain Sainsbury on its late payment "Hall of Shame" list for stretching payments to suppliers to 75 days.

Pharmaceutical giant GlaxoSmithKline received the honour in February for pushing the wait-to-be paid period to up to 95 days.

"It's bad news for the recovery," said Philip Shaw, an economist with Investec.

"It might be that the index is highlighting the need for government action to try to prevent those contagion effects from taking hold," Shaw added.

The index, based on a survey of 9800 companies in 29 countries in Europe, reflected the gap between economies in the north and those in the south.

Businesses in Greece, Cyprus, Hungary and Portugal were among the most at risk from late or unpaid bills, whereas Nordic nations, along with Germany, Switzerland and Austria, were least in danger.

But Lars Wollung, president and CEO of Intrum Justitia Group, a credit adviser, debt collector and financial services firm, said weaker confidence indicated a bleak outlook for the whole of Europe.