Companies in the United Arab Emirates expect increased delays in payments, a growing risk of default and an overall weakening in business performance as the country copes with the disruptive impact of COVID-19, according to Atradius’ latest Payment Practices Barometer survey.
With an economy struggling from the collapse in oil prices and major sectors, such as trade and tourism, hit by the pandemic, 53% of respondents in the UAE said they were concerned about a deterioration in the payment practices of B2B customers and a spike in long overdue invoices in the coming months. Nearly 30% reported they needed to delay payments to their own suppliers.
The UAE already offers the longest average payment terms — 57 days — compared to the 43-day average in Asia, leading to a sizeable proportion of working capital becoming tied up in receivables. Further, the proportion of credit-based B2B transactions in the UAE at 64% is significantly higher than the 56% average in Asia, pointing to the pivotal role that trade credit plays in the country.
The survey found that 72% of the total value of B2B invoices issued by UAE respondents is overdue; the average in Asia is 52%. Nearly 60% expect their industry’s indebtedness to trigger a greater dependence on bank finance while 49% are worried about a decline in business performance; the remainder felt they did not have a clear view of the future.
Also published on Medium.
