Executive Summary
Because of high economic volatility and uncertainty, Working Capital Requirements (WCR) increased by 2 days globally in 2024. Working Capital Requirements (WCR) rose by +2 days globally in 2024, reaching 78 days – the highest level since 2008 – with no major signs of easing in early 2025. This increase reflects the cost of adaptation to high uncertainty and tighter financial conditions as trade frictions and recession risks on the horizon have affected turnover growth, payment terms and inventory strategies. This is particularly true for Western Europe, which stood out with a +4-day rise for the third consecutive year, while APAC recorded a moderate increase (+2 days). In contrast, North America posted a -3-day decline in WCR, marking a rare divergence. As of Q4 2024, 35% of companies globally had WCR exceeding 90 days of turnover (down just 1pp y/y), and Q1 2025 data suggests a slightly stronger-than-usual seasonal rebound (+8 days q/q vs. a long-run average of +7).
The US stands out with a decrease of WCR by -3 days. Firms have been destocking (apart from a couple of sectors) to unlock capital and redirect it to shareholders – a very risky strategy in times of trade war. Despite a sharp rebound in imports – nearly USD1trn in Q1 2025, up +27% y/y, US business inventories fell, indicating selective frontloading rather than widespread stockpiling. The pharmaceuticals and medical goods sector alone imported the equivalent of 40% of its total 2024 imports in Q1, driven by tariff-related urgency, while clothing inventories fell despite a +10% rise in apparel imports, indicating consumers frontloading purchases. This easing of inventories has boosted earnings and freed capital, enabling share buybacks on track to exceed USD1trn in 2025 (USD234bn announced in Q1), while capex remains restrained amid ongoing policy uncertainty. US firms are reallocating resources to shareholder value creation.
Rising payment terms (DSO) are the primary force behind WCR pressure, especially in Europe. In 2024, global Days Sales Outstanding (DSO) rose by over +2 days, slightly exceeding the increase in WCR, while Days Payables Outstanding (DPO) expanded only marginally (+1 day) and Days Inventories Outstanding (DIO) remained stable. At year-end, 44% of firms had DSO above 60 days, and 21% above 90 days. These elevated levels were widespread across countries and particularly acute in Europe, where companies faced more pronounced delays in receivables collection (+2 days) for the third year in a row.
European firms continue to be the invisible banks for their customers, providing an estimated EUR11bn in trade credit and bearing growing financial risks. Amid sluggish growth and weak factory orders, European corporates increased DIO and maintained elevated receivables, while DPO shortened – resulting in significantly higher WCR. With bank lending in the Eurozone up just +0.8% on average in 2024, large firms effectively stepped in, providing an estimated EUR11bn in trade credit to their customers between Q4 2024 and Q1 2025. This informal corporate lending nearly matched banks’ monthly new credit flows over the same period. However, this strategy carries substantial risks: In the event of a growth shock or interest rate hike, the financing burden could rise dramatically. For instance, a trade war scenario involving “Liberation Day” tariffs could lower GDP by -1pp, forcing firms to finance an additional EUR8.5bn in Europe and USD15.5bn in the US – equivalent to a +3-day WCR increase. While a +1pp rate shock could add EUR14bn and USD26bn to WCR financing needs, underscoring the vulnerability of firms increasingly acting as credit intermediaries.
Almost all sectors faced a prolonged extension in DSO – notably transport equipment (+11 days) and electronics (+4) – leading to a broad-based rebound in WCR with relatively few sectors managing to reduce inventories in parallel. Overall, in 2024, seven sectors – transport equipment (+16 days globally), retail (+4), chemicals (+3), metals (+3), software/IT services (+3), machinery equipment (+2) and energy (+0) – experienced WCR increases across North America, Western Europe and APAC, mainly due to weak demand. WCR declines were more fragmented, observed mainly in US sectors and niche European segments like B2C services, paper and hospitality. In early 2025, the seasonal rebound in WCR affected nearly all sectors, with construction, commodities, machinery and transport equipment posting the largest reversals from previous trends.