Chaos and confusion over late payments directive
Ministers have cast doubt on when a new EU directive on late payments will be implemented into UK law in a letter to Shadow Business Minister Chuka Umunna MP.
During a House of Commons debate on late payments earlier this month, BIS Minister Ed Davey MP announced that the government would transpose the EU directive on late payments into UK law in the “first half of 2012, which is earlier than we are required to do. I hope that addresses some of the concerns that colleagues have expressed during the debate”.
However, Mr Umunna, who earlier this year called on the government to implement the directive early to help small businesses, has now received a letter from Mr Davey going back on the promise he made in Parliament.
Seeking to “clarify” the statement made during the debate, his letter says: “the deadline for transposition is 16 March 2013 and the outcome of the consultation will determine the final timetable for the transposition process”.
Statistics released in July by the Federation of Small Businesses show that 73% have been paid late in the past year and for a large majority (77%) this was by other businesses. According to payment industry body Bacs £24 billion is now owed to SMEs across Britain in late payments, with each business being owed on average £27,000 and waiting 39 days longer than stipulated by payment terms.
Increasingly, large businesses are extending payment terms beyond what could be reasonably expected by small and medium sized businesses which often rely on steady cash flow for survival.
The EU directive on late payments will introduce new curbs on commercial contracts setting payment terms longer than 60 days. Under its terms, payment terms beyond 60 days will only be valid if expressly agreed beforehand and in most cases, payment terms beyond 60 days will be deemed ‘grossly unfair’ and hence unlawful. The directive also establishes minimum levels of compensation for late payment.
Commenting, Shadow Minister for Small Business and Enterprise Chuka Umunna MP said:
“We have been calling for the government to bring forward implementation of the EU directive on late payment into UK law, which would help small businesses by clamping down on unfair payment terms.
“During the debate on late payments, the Minister said that the government would accede to this demand, but is now going back on his promise. It seems that incompetence in government has led to ministers making promises which they can’t keep.
“Ministers must act to end the chaos and confusion surrounding the late payment directive and give small businesses the certainty they need on this issue.”
