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Businesses are worried about the current spike in insolvencies across the region
This year’s Payment Practices Barometer Survey results for the US, Mexico and Canada (USMCA) have been published. They provide a snapshot of what businesses are experiencing right now and how optimistic they feel about the future. The main sentiment in this year’s survey is worry, caused mainly by the threat of insolvencies.
Almost half of the businesses surveyed in Canada and the USA told us they expected to see a surge in insolvencies. As reported in the recently published Atradius Insolvency Forecast, Canada and the United States experienced a spike in business failures at the beginning of this year.
What is the deal with insolvencies this year and next?
Insolvencies across the region are likely to remain at an elevated level next year, driven mainly by the surge seen in the USA. But the picture is not all bad.
In contrast to the sentiment expressed by businesses in this survey, Atradius economists expect insolvency levels to settle for Canada during 2025. They note that Canada experienced a temporary spike in insolvencies during 2024.
The survey’s respondents in Mexico told us they don’t expect the insolvency levels to change next year. However, the proposed amendment to Mexico’s Insolvency Act (Ley de Concursos Mercantiles) could have an impact, especially for smaller businesses that could benefit from proposals to make the system more viable for them.
What kind of payment practices can be seen across the region?
According to the survey, more than a third of businesses across North America – particularly in the US – deal with late payments by delaying payments to their own suppliers.
This potentially self-destructive chain can be broken of course. But it needs businesses to break the mindset of ‘if everyone else is doing it, why don’t we’, while also taking steps to protect their own operating capital or cash flow (with tools such as credit insurance).
Will the presidential election impact payment practices?
Definitely. Now that Donald Trump has won the presidential election, there is likely to be a sharp swing away from the policies currently operated by the Biden administration, particularly around import duties or tariffs. This could especially impact Canada and Mexico.
What is the main takeaway from this year’s survey?
Regardless of whether insolvency rates in Canada improve or not, what is certain is that there is currently a heightened risk of insolvencies across the region. Businesses trading and/or operating in the USMCA should consider taking steps to protect their accounts receivables from the risk of non-payments from customers that may not survive the upcoming period.
Detailed Payment Practices Barometer Survey results can be seen in the report. The key takeaways from the businesses surveyed include:
- Late payments currently affect around half of all B2B invoices in North America
- Around half of businesses in Canada expect insolvencies to increase in the near future
- Around half of businesses in Mexico expect insolvency levels to remain stable
- 67% of businesses across the region anticipate a surge in demand for their products and services
- Credit insurance is used by 40% of businesses in Canada and Mexico, but only 23% in the US