Cash to US shareholders and credit to European suppliers
- Global Working Capital Requirements (WCR) rebounded in 2024, reaching the highest level since 2008 (+2 days to 78), driven by longer payment terms (DSO +2 days)
- APAC firms among the most exposed to the longest DSO with 25% of companies are paid after 90 days
- European corporates acted as hidden bankers, providing an estimated EUR11bn in trade credit; US companies used freed-up cash to reward shareholders
- If the US "Liberation Day" tariffs are fully implemented, firms would need to finance an extra EUR8.5bn in Europe and USD15.5bn in the US (i.e. 3 days of turnover)
Allianz Trade, the world’s leader in trade credit insurance, released its Working Capital Requirements (WCR) and Days Sales Outstanding (DSO) report today. The findings highlight a growing divergence between North American and European corporate strategies, revealing how companies are navigating economic uncertainty, weak demand, and shifting trade policies.
Global Working Capital Requirements reached highest level since 2008
In 2024, global WCR rose by +2 days to 78, its highest point since the global financial crisis, with limited signs of softening in early 2025. While this was the case in most regions, Western Europe stood out with a 4-day surge for the third consecutive year while APAC recorded a moderate rise (+2 days). In contrast, the US stood apart with a decline driven by destocking.
“By Q4 2024, 35% of global firms had WCR exceeding 90 days of turnover, and partial figures point to a slightly larger-than-usual quarterly rebound,” states Ano Kuhanathan, Head of Corporate Research at Allianz Trade. “However, US business inventories fell despite record-high imports, indicating selective frontloading rather than widespread stockpiling. This has boosted earnings and freed capital, setting the stage for share buybacks to exceed USD1tn in 2025 (USD234bn announced in Q1). US firms are not betting on growth, redirecting capital from warehouses to wallets, and from factories to shareholders.”
APAC firms among the most exposed to the longest DSO and cashflow risks
APAC ended 2024 with a noticeable rebound in WCR (+2 days) that is reviving the upside trend already in place in 2021 and 2022 (+5 and +3 respectively), with China (+4) and Singapore (+2) among the top contributors. As of Q4 2024, WCR in APAC stood at 82 days of turnover, a record high for the region, with DSO at 66 days which is above the global average (62 days). Along with the Middle East, APAC has the largest proportion of firms exposed to the longest DSO and thus to cashflow risks: 25% of companies are paid after 90 days compared to 21% globally.
Seven sectors were the main contributors to the increase in WCR across North America, Western Europe and APAC, driven by weak demand: transport equipment, chemicals, energy, retail, machinery equipment, metals, and software/IT services. APAC clearly stands out from the US and Western Europe with a generalized rise in all sectors for WCR – in particular transport equipment (+22 days), commodities (+8 days) and pharmaceuticals (+6 days) – and DSO – in particular in electronics (+5 days), pharmaceuticals (+5 days) and B2B services (+4 days).
Longer payment terms are the main culprit, especially in Europe where corporates act as hidden bankers
In 2024, global DSO increased by +2 days – slightly more than the overall rise in WCR – making it the primary driver of the working capital rebound. In parallel, Days Payable Outstanding (DPO) increased slightly (+1) and Days Inventories Outstanding (DIO) remained stable. Meanwhile, European corporates increased DIO and maintained elevated receivables, while DPO shortened - resulting in significantly higher WCR.
“With higher inventories and lower DPOs, European companies have been bankrolling their trade partners by extending payment terms and absorbing risk,” says Maxime Lemerle, Lead Analyst for Insolvency Research at Allianz Trade. “Between Q4 2024 and Q1 2025, companies effectively provided an additional EUR11bn in corporate lending – almost matching banks’ monthly new credit flows since the start of the year.”
What could go wrong with the ongoing trade war?
Amid record-high uncertainty and trade tensions set to continue, global economic growth will remain at its lowest level since 2008, excluding recession episodes. In this context, weak demand will challenge companies’ turnover in 2025. With US companies having lower inventories and European ones carrying significant credit risk, they remain vulnerable to rising financing needs.
“In an adverse scenario, WCR would be pushed further up significantly. Should US tariffs be implemented at the rates announced on ‘Liberation Day’, GDP growth would be slashed by -1pp, driving up WCR; firms would need to finance an extra EUR8.5bn in Europe and USD15.5bn in the US compared to our baseline WCR forecasts (equivalent to 3 days of turnover for both regions). Similarly, if fiscal slippages and supply-driven inflationary shocks send interest rates up by +1pp, WCR could jump by EUR14bn in Europe and USD26bn in the US,” concludes Ana Boata, Head of Macroeconomic Research at Allianz Trade.
