The ability for companies across the World to recover commercial debt could become even more of a challenge as business insolvencies remain high in most countries while global fragmentation rises amid a reconfiguration of the trading system, volatile protectionism, geopolitical uncertainties, and higher digital risk.

The warning comes from the fourth edition of the Allianz Trade Collection Complexity Score and Rating, which examined how easy it is for companies to recover their dues in 52 economies that represent 90% of both global GDP and global trade.

Allianz said considering local payment practices, court proceedings and insolvency frameworks, Germany, the Netherlands, and Portugal are the three best countries to recover international debt, while Saudi Arabia, Mexico and the United Arab Emirates are lagging behind.

“International debt collection is almost three times more complex in Saudi Arabia than in Germany, but the latter is not without complexities in terms of international collection,” the report added. “Globally, collection complexity stands at ‘High’ level of 47.2 on our 0-100 scale.”

Allianz added in the past four years, three out of five countries in its sample have seen a change in their collection complexity score, with an almost equal balance between improvements and deteriorations.

Decreases in collection complexity (16) occurred notably among the most complex countries such as Saudi Arabia, the UAE and China, but they were large enough to lead to an improved rating in only five countries: Malaysia, Colombia, Türkiye, Greece, and Singapore.

Conversely, there were 15 increases in collection complexity most often proved to be moderate – particularly in Australia, Belgium, Senegal, and the US – but they led to a change in rating in Thailand and New Zealand.

“In that context, the gap between advanced economies and emerging markets has been gradually reducing over time, notably in Asia, but it remains in place. Most advanced economies have a ‘notable’ level of collection complexity, while the US and Canada both post a ‘Very High’ rating.”

For UK businesses Allianz Trade found that almost a quarter (24%) of exports leave British shores bound for the markets where it is most difficult for UK firms to collect their dues: China, the US and India.

Combined, exports to these destinations represent £162 billion ($221 billion) of exports leaving the UK. Of the UK’s top 20 export markets, these three nations pose the greatest risk to UK firms attempting to collect payments owed. Difficulties range from long delays on paying invoices, navigating complex legal processes or, most commonly, insolvency-related risks, when debt is written off or becomes highly unlikely to be recovered once insolvency procedures have begun.

“For example, 12% of all UK exports go to the US, which has a complexity score of 56 out of 100, putting it in the ‘very high’ category,” Allianz explained. “Debt collection in the US has become riskier since 2022, the last edition of Allianz Trade’s Collection Complexity Report, as the payment culture of domestic companies is becoming increasingly uncertain.

“With no harmonised framework on late payments, payment terms remain a mere contractual issue, while the average DSO (Days Sales Outstanding) tends to be high. These challenges are compounded by opaque legal structures comprising county, state and federal systems, adding complexity to even the simplest of lawsuits and debt recovery processes.”

China – which makes-up 10% of British exports and has a ‘severe’ rating of 66 – and India – which has a ‘very high’ score of 57 and represents 2% of UK exports – have seen their collection complexity scores decrease by one point apiece over the last four years. However, DSO remains much higher in both locations (China 94 days, India 75 days vs 51 days in the UK). Complex legal systems in which delayed payments are not effectively regulated, court hearings that are subject to delays and high costs make foreign debt rulings difficult to enforce.