CEE companies anticipate a rise in insolvencies

• Central and Eastern European (CEE) companies anticipate a rise in insolvencies in the upcoming months, chiefly due to ongoing economic strain especially for financially weaker firms.
   
• ​This concern, reflecting a broader trend across Europe, is compounded by several other challenges CEE companies expect to face in the short-term and long-term.

Companies surveyed in Central and Eastern Europe (CEE) demonstrate resilience and adaptability in navigating the challenging economic landscape. While 60% expect ongoing economic strain to trigger a rise in insolvencies over the next 12 months, nearly 33% also anticipate facing short-term and long-term challenges shaping the overall business landscape. This explains why 10% more CEE companies than last year are shifting focus to strategic credit risk management to protect their financial health.

The June 2024 edition of the Atradius Payment Practices Barometer for Central and Eastern Europe (CEE), a survey based on feedback from over 1,700 domestic and export suppliers across Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia, Slovenia and Turkey, highlights that three in five CEE companies expect a rise in insolvencies among their B2B customers in the upcoming months.

This concern reflects a broader trend across Europe, with the same number of Western European companies sharing similar anxieties. Expectations of increased insolvency risk impacting the business underscore the financial challenges companies expect to face in the upcoming months. To address these critical issues, companies are shifting their focus on enhancing credit risk management practices to safeguard their financial health against the impact of increasing insolvencies among their B2B customers on credit, amid ongoing economic pressure on the business.

Evidence of this strategic shift is found in our survey in Central and Eastern Europe (CEE) which indicates a 10% increase in the number of businesses in the region turning to credit insurance during the past 12 months, moving away from in-house customer credit risk management retention. 56% of companies which insured accounts receivable said this choice would help them reduce bad debt reserves and free up working capital to be used in operations and investment. Investment tends to be the area most affected by the impact of customer credit risk on the business, with over one in three CEE companies feeling the strain.

Such a proactive approach to enhanced credit risk management, involving also increased use of factoring and letters of credit, points to the resilience and adaptability of CEE businesses in navigating the current challenging economic landscape. However, it also explains why 34% of CEE suppliers surveyed are optimistic about the outlook for the payment practices of their B2B customers in the coming year. The strategic shift towards enhanced credit management helps companies mitigate the heightened risk of late payments and bad debts, contributing to an improvement in corporate payment practices, even in the face of a potential rise in insolvencies affecting especially financially weaker firms.

The Atradius Payment Practices Barometer for Central and Eastern Europe (CEE) also reports companies’ concerns about the challenges they expect to face in the short and long-term. Nearly 33% of companies in the region are chiefly worried about the impact of economic conditions on business operations and investment. These concerns are compounded by several other critical factors shaping the overall business landscape, requiring the adoption of strategic adaptations and robust risk management practices.

 

The complete report highlighting all findings of the June 2024 edition of the Atradius Payment Practices Barometer for Central and Eastern Europe (CEE) can be downloaded from the Atradius website at Atradius Publications.