In the Republic of Ireland, 47 per cent of businesses surveyed claimed late payments had impacted their business to such an extent that they had been forced to dismiss staff. 60 per cent claimed the problem had forced them to put recruitment plans on hold. Tony Carey, managing partner of Russell Bedford Dublin member firm Cooney Carey, points out that "The Irish banking system is only now making headway in resolving its own liquidity positions in order that it can lend. However, the withdrawal of a number of international banks has meant that a significant amount of available funds are being used to refinance existing banking arrangements."
The public sector is a particular problem, delaying payments (across Europe) by an average 58 days – a situation particularly acute in those countries most severely impacted by austerity measures, standing at 85 days in Italy and 105 in Greece.
Luca Borella, a partner at Russell Bedford Bologna member firm Magagnoli & Associati, feels this is the result of public sector contracts under which many companies are reluctant to pursue payment. "In fact, businesses are usually convinced that pursuing the public sector is highly ineffective and expensive and are, instead, often prepared to wait – suffering financially, losing income and, in turn, causing a ‘domino effect’, resulting in late payments to other companies not directly involved with the public organisations. Companies involved in public sector know very well that one of the main reasons for late payments recently is the effect of the Stability and Growth Pact, which created the conditions for the general financial slowdown. Hopefully, this scenario is slowly changing, partly thanks to recent legislation focusing on new rules for public sector payments."
This is a view endorsed by Ricardo García-Nieto Conde, partner at Russell Bedford Barcelona member firm ASEPYME / GNL Auditores. "It is hard to overestimate the impact current austerity policies have had on those businesses reliant on the public sector. There comes a point at which businesses have to evaluate the impact of public-sector clients on their on-going cash-flow situation, and their longer-term viability. There are signs of improvement, however. At PIMEC (Catalonia’s leading SME organisation)
Notes to Editors
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