Global business to business transactions have dropped by an eye-watering 62 percent since March 8, according to the latest data from Tradeshift.
The digital supply chain payments and marketplaces specialist handles trade transactions between over 1.5 million businesses in 190 countries.
Its report is the latest indicator of how badly the COVID-19 outbreak has roiled not just financial markets, but global trade, as the pandemic’s impact worsens.
The scale of the slowdown is having a significant impact on liquidity, with an increasing number of large organisations saying they are looking at ways to build or maintain cash reserves. Tradeshift said it is “actively working with customers to advise on measures to ease liquidity pressures and get working capital flowing through the supply chain.”
Christian Lanng, CEO, Tradeshift, said: “Every conversation I’m having with businesses right now centres on cash flow. Companies are looking at how they can keep cash on their books to see them through the current period.
“But they’re also acutely aware that suppliers are facing the same liquidity challenges. If cash dries up across the supply chain, we could see a lot of smaller businesses start to fold. It’s a balancing act. Get it wrong and the whole house of cards could come down.”
He added: “Large organisations I’m talking to recognise the importance of keeping supply chains solvent right now. Governments have been proactive in introducing measures to try to ease the pressure. But we can’t afford to leave any stone unturned. There is $1.5 trillion in liquidity sitting trapped and doing nothing in accounts receivable. If ever there was a time to take a serious look at how we unlock that capital and make it accessible to every business across the supply chain, it is now.”
Tradeshift helps buyers and suppliers digitize all their trade transactions, collaborate on every process, and connect with any supply chain app.
The reports came as Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley, State Street, and Wells Fargo said they had accessed funding from the Federal Reserve’s discount window.
The banks added that while individually they have “substantial liquidity and multiple sources of funding, they believe it is important to lead by demonstrating the value of the Federal Reserve’s discount window facility and to encourage its use by other financial institutions”, essentially to remove any market stigma from doing so.
In the UK, the Chancellor is set today to announce a major package of measures to help Britain’s businesses through the coronavirus crisis, the FT reports.