41% of Latvian companies have experienced a decrease in profits due to Covid-19, while for every tenth it has increased, as the crisis has opened up new business opportunities. In neighboring countries, the number of companies whose profits have decreased is even higher – in Lithuania it is 47%, but in Estonia exactly half of entrepreneurs have reported it. On the other hand, Latvian entrepreneurs have experienced an increase in profits more often than the European average, where they were only 6%, according to the annual “European Payments Report” conducted by Intrum, Europe’s leading credit management company.
One in two Latvian entrepreneurs (48%) admits that they managed to successfully survive the impact of Covid-19, relying only on their income and cash flow, at the same time still expecting a great deal of uncertainty in the coming years.
“The latest study shows that European entrepreneurs are starting to see light at the end of the tunnel and are thirsty for a new wave of growth. Although the consumer industry, including retail, is still experiencing a significant drop in profits and the impact of Covid-19 on business, entrepreneurs in Latvia have also accepted the conditions of the pandemic and are cautiously optimistic about the future. On the positive side, companies are paying much more attention to liquidity by tightening their credit management practices and reducing the risk of late payments. The payment gap or the difference between invoicing and payment has also narrowed this year, but the question is how much of a government subsidy will have an impact on this and whether strict discipline will remain in the future. Unfortunately, the research shows that in Latvia, the payment culture is rarely considered part of corporate social responsibility, only a third of companies have ethical standards for making payments on time, ”explains Ilva Valeika, General Director of Intrum in the Baltics. She points out that the real impact of the pandemic on payment behavior is not yet visible, and many have never been more concerned about their customers ‘and debtors’ ability to pay than they do now. Longer payment terms still cause difficulties for almost 4 out of 5 Latvian companies (81%), which is 13 percentage points more than in the previous year.
Entrepreneurs cautiously optimistic, hoping to return to business as usual by 2023
46% of Latvian entrepreneurs are optimistic about the future prospects, and about two thirds expect the positive effect of vaccination on business. On the other hand, half of the entrepreneurs (49%), whose profits have decreased due to the pandemic, believe that the usual business will return no sooner than 2022-2023. per year.
The study also shows that this year Latvian companies are less worried about the impact of the European recession on their operations than a year earlier. Currently, only 42% believe that a pan-European downturn could affect their partners’ payment transactions, compared to 64% of businesses in 2020.
“As elsewhere in Europe, the impact of the pandemic on the solvency of companies in Latvia has been very different by sector. The turnover of the accommodation and food service activities, arts and entertainment, transport and storage sectors decreased sharply last year; these industries were generally operating at a loss last year. In addition, a significant deterioration in the financial situation and declining profits also mean that less money is left for investment and the potential for a rapid recovery is reduced. The negative impact of the pandemic on other sectors has been less severe in general – the amounts of corporate turnover and profit decline have not been as large as in the directly affected sectors, in some of the sectors the turnover even increased slightly, ”informs Economist of the Bank of Latvia Andrejs Semjonovs. “The negative effects of the crisis on the solvency of companies have been mitigated by state aid and measures to deal with the effects of the pandemic, as well as the ability of companies themselves to adapt, and the financial situation of many companies has not deteriorated significantly. This gives such companies generally reasonable optimism about the future – economic and household consumption growth is expected to resume this year and continue in 2022-2023. per year. “
Faster digitalisation and increased focus on corporate governance
The pandemic has facilitated the faster digitalisation of Latvian business, especially in small and medium-sized enterprises, every third of which has experienced faster implementation of digital solutions than previously planned. 75% of respondents plan to continue implementing technologies in the coming years.
To stabilize the business, 90% of companies are committed to strengthening the company’s liquidity and cash flow in the near future, and 83% – to improving debt management.
The survey was conducted in the spring of this year (February to May) in 29 European countries by an international research company Longitude, Financial Times group company, surveying 11187 companies representing 11 different industries.
The full text of the Latvian study (in English) is available here – www.intrum.lv/epr2021
European payment message (in English) – www.intrum.com/epr2021
Through Intrum
Intrum is Europe’s leading credit management company operating in 25 countries. Intrum promotes the growth of other companies by taking care of their customers and offering solutions that improve the companies’ cash flow and long-term profitability. Ensuring that people and businesses get the support they need to get rid of the debt burden is an important part of a company’s mission. Intrum The group employs more than 10,000 people and serves more than 80,000 customers across Europe. Intrum is headquartered in Stockholm, Sweden, and its shares are listed Nasdaq Stockholm Stock Exchange. More about the company: www.intrum.lv.
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