Late payments putting 10m European businesses at risk

A new report by European debt collection specialist Intrum has highlighted that without improved economic conditions, up to 10 million European businesses face potential closure within two years, threatening up to 40 million jobs. Late payments are a key driver of this risk, draining liquidity and limiting SMEs’ ability to invest and grow. In the UK, almost 700,000 businesses are at risk, employing more than five million people.

With interest rates finally falling and some measure of economic stability apparently returning at the end of 2024, many UK businesses entered 2025 with an optimistic attitude to growth. However, it seems there is no end to the economic turbulence that has been wreaked by the pandemic, global conflicts and cost of living crisis. Instead, firms face yet more uncertainty, as international trading norms are questioned and even upended.

Six in ten UK businesses say growth is a top priority for them, with 38 per cent optimistic that the economy will pick up in the coming year – compared to the European average of 31 per cent. However, respondents report that issues with late payments are hindering their investment in growth initiatives and more than half believe late payment risks will increase this year.

If economic conditions don’t pick up soon, more than a fifth of UK firms say there is a risk they could go out of business in the next two years. That’s more than 600,000 organisations employing over five million people. Unsurprisingly, SMEs are most vulnerable – more than a quarter (26 per cent) say they are at risk.

More than a third of UK firms say payment delays are as bad today as they were during the extreme economic disruption of the pandemic, with almost 12 per cent of revenues paid late. While across Europe, the number of businesses worrying about their customers’ ability to pay has fallen, the UK has seen the opposite trend. That concern has ticked up from 55 per cent to 59 per cent.

Given these figures, businesses are determined to take a tougher stance on payments. Almost half (47 per cent) say they are introducing stricter payment terms as interest rates and inflation have moderated. The number who will not negotiate longer terms is also rising, showing a turning of the tide when it comes to managing payments. Desperate for growth, UK firms are looking for a break and the culture of late payment is something many are less willing to tolerate than in the past.

The European Payment Report paints a complex picture – while 2025 was expected to be a turning point for economic recovery, new headwinds are slowing momentum. From late payments and liquidity challenges to the growing role of AI in managing receivables, this year’s findings are more relevant than ever.

Around nine in ten (88 per cent) UK businesses are open to using or are already using AI technology in their payments management. In addition, over half agree AI will significantly enhance the ability to manage late payments.

AI is emerging as a promising solution to address delays in payments. In this year’s report, 53% of executives stated that advances in AI will significantly enhance their ability to manage late payments, up from 51% in 2024, with public sector leaders particularly optimistic about the potential upside in AI. Despite this, businesses are not fully embracing AI’s potential. Only 23% of UK companies believe their customers prefer using AI when discussing late payments. However, Intrum’s European Consumer Payment Report 2024 found that around one in three consumers under the age of 44 would feel less judged talking to an AI bot than a human in this context.

Payments were severely disrupted during the pandemic, and five years on, improvement remains elusive. Over a third of executives said that payment delays have still not returned to pre-pandemic levels, with 11% of revenues typically paid late. There is an enormous amount at stake.

On the positive side, 56 per cent of UK businesses have reported better than expected performance in innovation, something likely to have been boosted by the adoption of AI technology. Almost nine in ten companies are open to using AI or are already doing so for payments management. This is a seismic change in the industry and one that offers greater efficiency, improved analysis and better customer engagement as well as the opportunity to lower late payment.

There are challenges to face – only a quarter of firms are using AI to its full potential and there is the issue of incoming regulation to navigate. However, while global economic events rage, there is much that businesses can do to position themselves for the future. Handled well, AI technology offers massive benefits in the payments sphere and the report says that it expects to see its use increase significantly in the coming months and years.

The full report can be downloaded here.