Europe Shows Deterioration in Cash Conversion Cycle as Financial Strain Deepens

The Hackett Group, Inc. (NASDAQ: HCKT), a leading Gen AI consulting and enterprise digital transformation firm, today announced the results of its 2025 European Working Capital Survey, revealing that the region’s working capital efficiency continued to decline in 2024, with the cash conversion cycle (CCC) worsening by 3%.

The analysis – covering the 1,000 largest European-headquartered nonfinancial companies – found that deterioration was driven primarily by rising days sales outstanding (DSO) and days inventory outstanding (DIO), which outpaced gains in days payable outstanding (DPO). European companies now have €1.4 trillion tied up in excess working capital – representing 14% of aggregate revenue and 37% of gross working capital.

“After two years of revenue contraction and sustained margin pressure, Europe’s working capital picture has become increasingly fragile,” said István Bodó, senior director, Finance Transformation at The Hackett Group. “Top-quartile performers are holding steady, but median companies are falling behind – driving the overall decline. With Gen AI, finance leaders now have powerful tools to uncover inefficiencies and unlock liquidity that can strengthen resilience and fund growth.”

Key findings

• CCC increased 3% to 44.8 days – the third consecutive year of deterioration.
• DSO rose 1% to 48.5 days, reflecting higher trade accounts receivable balances and falling revenue.
• DIO jumped 4% to 68.9 days – its highest level in a decade – as companies built inventory buffers to manage supply chain and geopolitical risks.
• DPO improved 3% to 72.6 days, underscoring the growing leverage of buyers to negotiate longer terms amid persistent supply chain challenges and geopolitical turmoil.
• Aggregate revenue declined for the second year in a row, while total debt as a percentage of revenue increased as companies relied more heavily on borrowing to maintain liquidity.

The report highlights sharp contrasts across countries – Germany (+7%) and the UK (+2%) experienced worsening CCC, whereas France and the Nordics recorded modest efficiency gains.

“The €1.4 trillion opportunity to release trapped cash represents the most affordable and immediate source of liquidity available to European companies,” said Anne Morgan-Smith, director, Executive Advisory at The Hackett Group. “As inflationary and supply chain pressures resurface, finance leaders who prioritize working capital discipline – supported by Gen AI and advanced analytics – will be best positioned to maintain financial flexibility.”