The Single Market and Late Payment

and its effect on the competitiveness of companies

Leif Hallberg, Director of European Public Affairs

EU Commission / TOBB, Ankara, 22 Nov 2007

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Late payment - a serious obstacleto business and economic growth

• Uncertain payments …

• Late payments …

• Payment losses …

• EU Commission 1997:

”Late payments represent an increasingly serious obstacle for the success of the Single Market”

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European Payment Index (EPI)

• Annual across-Europe survey of payment habits

• 2007 report reflects opinion of business managers in 25 countries

• A majority remain strongly concerned about consequences of late payments

• Need remains for improved legislation

• Businesses can benefit from professional credit management

• Better knowledge of credit profiles and payments habits - No. 1 key answer

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EPI findings from previous years …

• Great payment variations across Europe

• Payments are traditionally very late in South Europe and most reliable in the Nordic markets

• Persistent payment problems hamper business and especially cross-border trade

• Unequal payment terms - unfair competition

• Paid late will pay late

• Companies use late payment as an extra credit

• Governments are the worst late payers

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How does it look now?

• Payment risks decreased some, but primarily a consequence of a change in economic growth! Higher risks in Italy and Denmark

Lower risks in Germany, the UK, France, Spain, the Netherlands, Belgium and Poland

• Payment duration decreased some, but is still above 2004 level! 2004 58.2 days; 2005 58.8 days; 2006 59.2 days; 2007 58.6 days

Italy highest increase (+3.8 days), followed by Czech Republic

Lithuania (-4.8 days) highest payment duration decrease

• Payment delay also decreased some 2004 15.8 days; 2006 16.6 days; 2007 16 days

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How does it look now?

• All three customer categories contributed to slight upward trend Individual consumers, from 42.5 days to 42 days

Business companies, from 59.9 days to 58.6 days

Public sector agencies, from 69.8 days to 68.9 days

• Payment loss rate continued‚ ‘sideways‘ trend, fluctuating between 1.7% and 1.9%. Spain highest decrease (-0.9%), followed by Norway (-0.7%) and Portugal (-0.7%)

Denmark highest increase (+0.6%) followed by Italy, Iceland and France (all +0.4%)

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How does it look now?

• In spite of light improvements, companies remain overall modestly pessimistic about payment risk development Hungary tops list of pessimists

Latvia and Slovakia and Czech Republic remain optimists

• Conclusion

Payment risks are different from one country to another

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Companies’ time needed to handle household accounts

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Why payment intention has increased or decreased

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Concluding statements

• Payment habits are benchmark of good business behaviour

• To manage payment risks one needs to know them• The answer to late payment lies with,

– Better legislation– Public debate focus– Company awareness of possible gains from professional

credit management

• Professional credit management services providers play an essential role

• Time has come to put credit management in focus

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EU regulatory initiatives

Further to the Late Payment Directive,

• Directive (2000/35/EC) for combating late payments in commercial transactions

• European Enforcement Order for Uncontested Claims; Regulation (EC) No 805/2004

• European Order for Payment Procedure; Regulation (EC) No 1896/2006

• European Small Claims Procedure; 2005/0020 (COD)

• Attachment of Bank Accounts; COM (2006) 618

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EU legislation - some suggestions

• The Late Payment Directive and any other legislation covering payments in general must be STRONG, UNAMBIGUOUS and VIGOROUSLY ENFORCED

• Need for awareness-raising information campaigns

• Need for conformity in definitions of costs and fees

• Need for rapid procedures for processing claims

• Need for higher statutory interest

• Need for mandatory fee for late payment over 30 days

• Need for compulsory reporting of businesses that practice late payment

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Thank you for your attention!Tesekkür ederim!

Leif HallbergDirector of European Public Affairs

INTRUM JUSTITIA AB

l.hallberg@intrum.com

Intrum Justitia is Europe’s leading Credit Management Services(CMS) group, with revenues of approximately SEK 2.9 billionand around 2,900 employees in 24 markets. Intrum Justitiastrives to measurably improve its clients’ cash flows and longterm profitability by offering high quality in relationships withboth clients and debtors in each local market. The group offersa wide range of services to manage commercial and consumerreceivables. Intrum Justitia AB (ticker IJ) is listed on the NordicExchange, Mid Cap list. For more information, please visitwww.intrum.com