Significant numbers of British and German firms are seeking to extend payment terms with key suppliers even though a majority acknowledge that it will be unsustainable for some of them.
Sixty-three per cent of UK-based firms and 48 per cent of German firms said financial pressures were causing them to try to pay suppliers more slowly, according to a survey of 1,000 finance directors by Demica, a supply chain financing specialist.
But 88 per cent of British firms and 55 per cent of German firms admitted that “some of our key suppliers will not be able to sustain further lengthening of payment terms”.
For larger German companies (those employing over 2,500 people), this figure went up to 63 per cent.
“While the situation regarding extension of payment terms is problematic in Germany, it appears to be overwhelming in the UK,” said Phillip Kerle, Demica’s chief executive.
He warned that the issue had reached a “critical point” and that if firms pushed much harder they could put “essential suppliers out of business” and supply chains could “collapse like a pack of cards”.
Demica’s research found that for three-quarters of British companies and just under half of German ones, supplier financing had become a more important issue since the start of the credit crunch.
Sixty-one per cent of British firms said they were seeking to monetise their receivables or payables in order to improve liquidity in their supply chains, compared with 43 per cent of German firms.
And a majority of finance directors in both countries believed that market conditions had brought closer alignment between their function and procurement – 55 per cent in Germany and 81 per cent in the UK.
