Covid-19: firm’s liquidity needs at record levels, payment delays are getting longer

According to Euler Hermes, global leader in Trade Credit Insurance, the Covid-19 crisis is leading to longer payment delays worldwide. On average, a company will have to wait 66 days in 2020 before an invoice is paid by another company. In 2021, the average payment delay will even increase to 68 days. Firm’s liquidity needs will rise to a record high of USD8 trillion.

• Global firms’ liquidity needs, as measured by Working Capital Requirements (WCR) will increase by +5 days to 74 days in 2020 or a record high of USD8 trillion.
• Payment delays, as measured by Days Sales Outstanding (DSO), will increase by +2 days to 66 days in 2020, and by another 2 days to 68 in 2021, it is the highest level over the last decade. After two consecutive years of decreases, DSO will increase twice as much as during the financial crisis on the back of the Covid-19 cash crisis.
• Transportation, automotive, textiles and (non-food) retail should be most liquidity-stressed. They will register the highest increases in WCR in 2020 (above +5 days) and deteriorating profitability, possibly entering distress territory, should they lack support from banks and investors in the coming months. Metals and construction also appear to be very fragile considering their current liquidity positions. In contrast, pharmaceuticals and agrifood are in the best positions.

Ed Goos, Euler Hermes BeLux CEO: