Late payments 'costing EU companies billions'

Richard Hyslop, EU and international affairs policy advisor at the Federation of Small Businesses, says SMEs are suffering from the combination of tight credit markets and late payments. "With the UK economy in steep decline small businesses have found themselves at the eye of the perfect storm. Caught between contracting markets, late payments, increasing overheads and a sharp decline in access to finance, many small businesses have failed," he said. 

Mark Fielding, chief executive of Irish small firms lobby group ISME, says otherwise viable companies are going out of business due to delayed payments. "The problem is getting much worse. Small businesses in Ireland are waiting an average of 69 days for payment. This is the longest period on record. The main culprits are big business and the public sector. The number of companies experiencing delays in payment of more than three months is up 42%. The very survival of many SMEs is threatened by late payments and businesses face bankruptcy because of the changed bank lending policies," he said. 

European Small Business Alliance President Tina Sommer says bailouts for big companies should insist that they pay smaller suppliers on time. "Anybody involved in the supply chain will hopefully indirectly benefit from the vast bailouts. However, late payments by large companies can undo some of the potential benefits for small companies. The bailouts should have the requirement of timely payment to suppliers," she said. 

Andrea Benassi, secretary-general of the UEAPME, the European Association of Craft, Small and Medium-Sized Enterprises, welcomed the spirit of the recast directive but expressed disappointment that it did not go further. In particular, he criticised the Commission for focusing exclusively on public sector payments. 

"In spite of our repeated warnings, commissioners decided to go ahead and exclude business to consumer transactions from the scope of the text. This questionable choice will leave SMEs on their own against late payments from private customers, which are a growing concern in the present economic downturn. Small businesses were definitely expecting more from this long overdue proposal," he said. 

Launching the revamped directive last month, European Commission Vice-President Günter Verheugen, responsible for enterprise and industry, said the Late Payments Directive will help alleviate some of the pressure of the credit crisis. "Late payment by public administrations should be no longer tolerated. Today's proposal provides an important impetus to overcome the economic crisis by helping to avoid further bankruptcies and promoting businesses' cash flow in order to reinforce the competitiveness of European enterprises in the long term," he said.