Small firms herald deal on late payments

Date: 20/04/2000

By Renée Cordes

EU GOVERNMENTS and MEPs have reached agreement on European Com-mission plans to punish companies which fail to pay their bills on time, paving the way for the legislation to be introduced within two years.

Under a deal which is due to be rubber-stamped by EU industry ministers next month and formally approved by the European Parliament in June, firms which have not settled their bills after 30 days will have to pay interest at 7 percentage points above the European Central Bank's repurchase rate.

The Parliament had originally called for a deadline of 21 days and for interest to be paid at eight percentage points above the 'repo' rate. But it ran into fierce opposition from governments, which insisted that companies should be given 30 days to pay up. They did, however, agree to compromise over the interest rate, having initially insisted that it should be set at six percentage points above the repo rate.

In addition, creditors will be entitled to recover all the costs they incur in chasing up unpaid bills and member states will have to provide simplified legal procedures for punishing firms which run up hefty debts.

"There has been some tough negotiating, but the important thing is that we will have a directive to change the culture of late payments bureaucracy," said UK Socialist MEP Simon Murphy, who led the Parliament team which negotiated the deal with EU governments. "We have a good deal which addresses a serious problem for many small businesses."

The aim of the Commission proposals published two years ago was to introduce uniform debt-recovery procedures throughout the Union. The move came in response to a clamour for action from small and medium-sized enterprises (SMEs), which are heavily dependent on the prompt payment of bills by their customers, and demanded more leverage in their attempts to get accounts settled on time.

The Commission claims late payments cost the EU more than 450,000 jobs a year and are responsible for more than a quarter of all bankruptcies affecting SMEs.

"We are extremely happy," said Garry Parker, a spokesman for European SME lobby group UEAPME. "After ten years, we will finally have harmonised procedures for late payments. But the question is how soon and how effectively they will be implemented by member states."

The agreement comes as the Commission itself continues to face criticism for failing to pay its own bills on time.

EU Ombudsman Jacob Söderman, who has been investigating complaints from contractors about alleged foot-dragging by the Union executive, asked the Commission late last year to provide details of the steps it has taken to reduce delays in making payments. He plans to publish its response within the next few weeks.

EU governments and MEPs have reached agreement on European Commission plans to punish companies which fail to pay their bills on time, paving the way for the legislation to be introduced within two years.