The Transatlantic divide in WCR

Global Working Capital Requirements reached highest level since 2008

In 2024, global WCR rose by +2 days to 78, its highest point since the global financial crisis, with limited signs of softening in early 2025. While this was the case in most regions, Western Europe stood out with a 4-day surge for the third consecutive year while APAC recorded a moderate rise (+2 days). In contrast, the US stood apart with a decline driven by destocking.

“By Q4 2024, 35% of global firms had WCR exceeding 90 days of turnover, and partial figures point to a slightly larger-than-usual quarterly rebound,” states Ano Kuhanathan, Head of Corporate Research at Allianz Trade. “However, US business inventories fell despite record-high imports, indicating selective frontloading rather than widespread stockpiling. This has boosted earnings and freed capital, setting the stage for share buybacks to exceed USD1tn in 2025 (USD234bn announced in Q1). US firms are not betting on growth, redirecting capital from warehouses to wallets, and from factories to shareholders.”

Seven sectors were the main contributors to the increase in WCR across North America, Western Europe and APAC, driven by weak demand: transport equipment, chemicals, energy, retail, machinery equipment, metals, and software/IT services. In contrast, WCR declines were more scattered, with a majority of US sectors improving and a few specific sectors in Europe (paper, B2C services, hospitality) seeing reductions.

Longer payment terms are the main culprit, especially in Europe where corporates act as hidden bankers

In 2024, global Days Sales Outstanding (DSO) increased by +2 days – slightly more than the overall rise in WCR – making it the primary driver of the working capital rebound. In parallel, Days Payable Outstanding (DPO) increased slightly (+1) and Days Inventories Outstanding (DIO) remained stable. Meanwhile, European corporates increased DIO and maintained elevated receivables, while DPO shortened - resulting in significantly higher WCR.

“With higher inventories and lower DPOs, European companies have been bankrolling their trade partners by extending payment terms and absorbing risk,” states Maxime Lemerle, Lead Analyst for Insolvency Research at Allianz Trade. “Between Q4 2024 and Q1 2025, companies effectively provided an additional EUR 11 billion in corporate lending – almost matching banks’ monthly new credit flows since the start of the year.”

What could go wrong with the ongoing trade war?

Amid record-high uncertainty and trade tensions set to continue, global economic growth will remain at its lowest level since 2008, excluding recession episodes. In this context, weak demand will challenge companies’ turnover in 2025. With US companies having lower inventories and European ones carrying significant credit risk, they remain vulnerable to rising financing needs.

“In an adverse scenario, WCR would be pushed further up significantly. Should US tariffs be implemented at the rates announced on ‘Liberation Day’, GDP growth would be slashed by -1pp, driving up WCR; firms would need to finance an extra EUR8.5bn in Europe and USD15.5bn in the US compared to our baseline WCR forecasts (equivalent to 3 days of turnover for both regions). Similarly, if fiscal slippages and supply-driven inflationary shocks send interest rates up by +1pp, WCR could jump by EUR14bn in Europe and USD26bn in the US,” explains Ana Boata, Head of Macroeconomic Research at Allianz Trade.