Growth plans and inflation uncertainty in European companies

Analysis

More than 70% of Hungarian business leaders expect payment problems to increase due to rising inflation and interest rate hikes. At the same time, domestic entrepreneurs feel stronger than their European counterparts and have set aside more significant resources to cover the expected growth or unexpected problems, according to Intrum’s 2022 European Payment Report (EPR).

The survey describes the impact overdue payments have on development and growth and finds that European companies do not feel prepared to manage non-payment risks caused by inflation.

According to the EPR, 36% of Hungarian businesses feel stronger than two years ago, while the European average is 23%. At the other end of the scale, 44% of Hungarians reported more difficulties, 5% lower than the European average.

“As a result of government programs to help businesses, domestic [Hungarian] businesses can face the challenges of inflation much better than their European counterparts,” said Károly Deszpot, CMS director of Intrum Hungary. “Forty-seven percent of Hungarian respondents said that they are acquiring or have acquired adequate funds to ensure growth, while the European average was 39%.”

Some 70% of Hungarian business managers are more concerned that high inflation may cause payment problems for their customers in the next 12 months, while 62% believe that interest rate increases will cause such a problem.

The confidence of Hungarian businesses is also unique in the region. Bulgarian companies see their situation in the most unfavorable terms, with 16% of companies feeling stronger while 46% feel weaker. In Slovakia, the proportion of companies that said they were stronger was 26%, while in Bosnia, it was 31%.

In Europe, 51% of the respondents reported that increasing inflation would worsen the chances of growth, and 55% agreed with the statement that it caused tension with employees due to demands for higher wages. According to 58% of the respondents, accelerating inflation also harms solvency since it will be more difficult to pay suppliers’ invoices on time due to rising prices.

“Half of the European companies feel that they are on a weaker footing than before the virus crisis, and only 23% think they are stronger,” said Deszpot. “The latest crisis, the increase in inflation, has made market players uncertain; they feel they are not adequately prepared to deal with the problem,” he added.

The insights are based on a survey from 11,007 small-, medium- and large-sized companies across 29 European countries, covering 15 industry sectors. The report was compiled between January 17 and April 13.

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