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 the credit management company “Intrum”.
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 the light at the end of the tunnel and are thirsting for a new wave of growth. Although the consumer industry, including retail, is still experiencing a significant drop in profits and Covid-19 business impact, entrepreneurs in Latvia have accepted the pandemic. It is positive that companies are paying much more attention to liquidity by tightening their credit management practices and reducing the risk of late payments, as well as the gap between invoicing and payment has narrowed this year. Unfortunately, the study shows that the payment culture in Latvia is rarely considered part of corporate social responsibility, only a third of companies have ethical standards for making payments on time, “explains Ilva Valeika, CEO 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.
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 corporate solvency in Latvia has varied widely across sectors. Turnover in the accommodation, catering, arts and entertainment, transport and storage sectors fell sharply last year; these sectors were generally loss-making last year. In addition, significant financial deterioration and profits The negative impact of the pandemic on other sectors has been less pronounced, with the turnover of companies and the fall in profits not being as large as in the sectors directly affected, and in some sectors even a slight increase in turnover. , “informs Andrejs Semjonovs, an economist at the Bank of Latvia.
“The negative effects of the crisis on the solvency of companies have been mitigated by state aid and pandemic measures, as well as the ability of companies themselves to adapt, and the financial situation of many companies has not deteriorated significantly. This gives them generally reasonable optimism about the future. The growth of household consumption will resume already this year and will continue in 2022-2023, “says A. Semjonovs.
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.
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