Why doesn’t government enforce the EU directive that big companies pay within 60 days?
Following many years of late payment of bills endangering smaller companies– with the average business owed £31,000 – the Coalition’s Business Secretary MP Vince Cable is to compel companies to publish information about their payment terms.
Last year the subject of late payment was covered on this site, recalling that for many years an engineer neighbour found that the Dutch engineering industry’s system works well: 30% of the full amount due is paid immediately, and then 30% is paid on completion of the job. The final amount is deemed to be the profit and follows later within a stipulated time frame. This does help to avoid the cash-flow problems afflicting those in this country who often have to wait for three months – and more – before any payment is made.
Large companies who have been delaying payment to their suppliers to maximise their profits, might – it is hoped – be ‘shamed’ into changing their behaviour.
Brian Groom of the Financial Times reports that tougher measures such as fining or naming the defaulters could be introduced if the latest plan proves ineffective. Suppliers have been able to charge interest on late payments since 1998, though few do so because they fear upsetting powerful customers.
The government will work with the Institute of Credit Management to strengthen the voluntary Prompt Payment Code, which more than 1,500 companies have signed.
John Allan, chairman of the Federation of Small Businesses, said: “Whether these measures go far enough without calling for a statutory code will be determined by how big companies change their culture”.
Late Payment Information Campaign
The European Commission has organised a two-year campaign in the 28 Member States to end in December 2014. The aim is to increase awareness amongst European stakeholders, in particular SMEs, and within public authorities on the new rights conferred by Directive 2011/7/EU.
Voluntary regulation has repeatedly failed to influence corporate practice – but dare the government offend those with whom they have such close and cordial relations?
Posted on May 30, 2014, in Conflict of interest, Corporate political nexus, Government, Parliamentary failure, Planning, Vested interests and tagged Dutch engineering industry, EC pay on time campaign, EU’s Late Payment Directive, MP Vince Cable, Prompt Payment Code, Voluntary regulation. Bookmark the permalink. Leave a comment.