While INSEE has just reported sluggish GDP growth for the first quarter of 2024 (0.2%), the outlook for the business world could brighten for the rest of the year, according to data from the National Institute and the OECD. This view is far from being shared by business leaders: according to our Cabinet ARC/IFOP survey, more than two-thirds of companies believe that the French economic situation is likely to deteriorate over the next six months. As for their own business, 80% of the companies surveyed do not expect growth in the second half of 2024, and 16% of them even anticipate a decline.
Following the post-COVID recovery observed in 2021, economic activity has been severely impacted by the war in Ukraine and the Israeli-Palestinian conflict. As a result, bankruptcy filings could continue to rise: 96% of companies believe that the current economic situation is likely to lead to an increase in the number of bankruptcy filings. As a result, business leaders remain wary of their customers’ ability to repay their debts; one-quarter of companies believe their customers will not be able to repay their debts (government-guaranteed loans, payroll taxes, investments, invoices, etc.). To meet their cash flow needs, companies are relying on bank overdrafts and/or discounting their commercial paper. However, three-quarters of them admit to extending payment terms to their suppliers to cover their cash flow needs.
A European response?
As the new European Parliament is set to take office shortly, MEPs will have to decide on reducing payment terms from sixty to thirty days. The measure, which was debated before the recess following the June 9 election, aims to establish a maximum payment term of thirty days from receipt of the invoice in order to better combat late payments in commercial transactions.
In response to this proposal from Brussels, French business leaders are nevertheless expressing some reservations about the measure proposed by the European Commission. Although half of all companies believe their customers will be able to meet this new deadline, the figures reveal mixed outlooks regarding its expected effects. Only 26% of companies believe that this reduction could actually lead to a decrease in the number of bankruptcies, while 60% believe it will have no impact on late payments.
“The companies surveyed also expressed skepticism regarding the European Commission’s proposal to reduce the maximum payment period from 60 to 30 days. Many of them doubt that the measure will be complied with and therefore be effective, given current practices and the payment delays they face today. Nevertheless, in order to ultimately provide companies with cash flow, it is necessary to intensify efforts to reduce payment terms—a reduction that must be gradual and implemented in stages,” commented Denis Le Bossé, President of Cabinet ARC