New European Commission study on late payment practices

Adopted on 16 February 2011, Directive 2011/7/EU on combating late payment in commercial transactions was due to be integrated into national law by EU Member States before 16 March 2013. It aims to protect businesses, in particular SMEs, from the detrimental effects of late payment and to improve their competitiveness. However, several stakeholders, and especially SMEs, have been very vocal about the persistency of late payment issues. For this reason, the European Commission has recently published a study titled “Business-to-business transactions. A comparative analysis of legal measures vs. soft-law instruments for improving payment behaviour”, carried out by VVA and Milieu.

Indeed, the study has assessed the regulatory and voluntary measures that have been put in place across several industry sectors, among others, construction, based on the data gathered in 28 EU Member States. It then extrapolated a set of recommendations indicating as to whether the provisions of the directive, relevant to B2B transactions, are fit for purpose and whether other actions and policies, outside the scope of the directive, can actively support the achievement of its objectives in the B2B environment.

Late payment practices in particular affect construction SMEs, which account for about 99,9% of all enterprises in the sector. The reason is that they are often neglected and more exposed to late payment issues, especially when dealing with larger companies and public bodies. Therefore, EBC welcomes the study as a step in the right direction to further improve payment behaviour in commercial transactions. EBC President Rinaldo Incerpi states: “Late payment practices particularly affect construction SMEs, because they fear damaging business relationships and thus often do not take actions other than payment reminders, when not being paid. Better enforcement of the Late Payments Directive should be further encouraged in order to avoid late payment situations and to foster a culture where the situation of SMEs is adequately considered”.

To read or download the study, click here.