Prompt payment for UK firms across Europe

20 Sep 2012 11:21 AM

Business and Enterprise Minister Michael Fallon has today published a consultation on implementing European Union (EU) legislation to combat the problem of late payment to British businesses.

The UK was one of the first countries to introduce late payment legislation and is already seen as an exemplar across Europe. Implementing the EU Directive will therefore create a level playing field for UK businesses trading with other businesses and public authorities in all Member States.

Business and Enterprise Minister Michael Fallon said:

“The UK already has some of the strongest late payment laws in Europe which are now being copied across Europe. This will give a real boost to UK business by providing them with the confidence and certainty they need to work with overseas suppliers.

“But legislation alone cannot deal with the issue of late payment. Businesses need to make sure they have suitable measures in place to help themselves. Tackling late payment will free up millions of pounds in the supply chain, helping to boost the economy and safeguard the future of thousands of UK companies.”

The main points in the EU Directive are that:

· Public authorities will be required to pay suppliers within 30 calendar days of receipt of an undisputed invoice. (This matches the UK Government’s standard practice for the public sector).

· For business to business payments, the period for payment fixed in the contract should not exceed 60 days, unless otherwise expressly agreed and provided such terms are not grossly unfair.

· It copies current UK practice of a default payment period of 30 days, where terms have not been agreed.

· There is a minimum €40 (approximately £31) for compensation. (Current UK legislation sets three levels of compensation payment according to the value of the payment). Suppliers will not be prevented from seeking to claim additional recovery costs.

The Government is already working alongside industry bodies in the UK to encourage more businesses to sign up to the Prompt Payment Code which encourages good practice. Over 1,100 businesses have already signed up to the Code.

The consultation will run until 19 October 2012. Transposition of the EU late payment directive is due to take place on 16 March 2013.

Notes to editors:

1. Further information on the consultation can be found at www.bis.gov.uk.

2. Businesses can sign up to the Prompt Payment Code now at http://www.promptpaymentcode.org.uk/

3. The Government is leading the way by ensuring that its suppliers are paid on time. Since 2011, the Cabinet Office has made it a condition of goods and services contracts that payment is made up to tier 2 subcontractors within 30 days. In the Construction Sector this has been extended further with payment down to tier three subcontractors within 30 days. Any companies experiencing problems with payment on government contracts, either directly or through the supply chain, can use the Cabinet Office Mystery Shopper scheme to make an anonymous complaint and trigger an investigation by the Cabinet Office. In the construction and facilities management sectors, the Government is rolling out the use of Project Bank Accounts: legally ring-fenced and protected bank accounts for government contracts from which payments are made directly and simultaneously to all participating members of the supply chain.

4. Independent analysis by Experian suggests that current signatories to the Code represent over 60 per cent of total UK supply chain value.

5. BIS paid 93.6 per cent of invoices within five days in December last year, and averaged 95 per cent across the year.

6. The Association of Chartered Certified Accountants (ACCA), Experian, the Forum of Private Business and the Institute of Credit Management (ICM) have published a new guide to ensure prompt payment, aimed at owners and managers of small businesses. Get Paid! forms part of the four partners’ activity to encourage prompt payment, working together with the Department for Business, Innovation and Skills (BIS) and the private sector.

7. The Government's economic policy objective is to achieve 'strong, sustainable and balanced growth that is more evenly shared across the country and between industries.' It set four ambitions in the ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011:

· To create the most competitive tax system in the G20

· To make the UK the best place in Europe to start, finance and grow a business

· To encourage investment and exports as a route to a more balanced economy

· To create a more educated workforce that is the most flexible in Europe.

Work is underway across Government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the Government wants the economy to travel.

8. BIS's online newsroom contains the latest press notices and speeches, as well as video and images for download. It also features an up to date list of BIS press office contacts. See http://www.bis.gov.uk/newsroom for more information.

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