Despite the recast of Directive 2011/7/EU on combating late payment in 2011, payment delays remain a serious and widespread problem in the European Union. One of the sectors most strongly impacted by this is construction, featuring the longest payment duration with an average of 72 days in 2016. In fact, it is estimated that only about 15% of the payments in the construction sector are on time whereas 10% of them are delayed by more than 60 days. Those circumstances especially harm micro, small and medium-sized enterprises (SMEs) which appear to disproportionately suffer from late payment.
There are several reasons that make the construction sector vulnerable to late payment, e.g. the long and interdependent supply chain in which late payment accumulates quickly, the imbalance of power between undertakings and the frequency of disputes over the quality of goods and services which additionally prolongs the payment period.
However, central to the persistence of late payment is the legal leeway frequently used by enterprises and public authorities as well as the lack of consequences for late payers. Therefore, EBC calls for a recast of the Directive on combating late payment:
- Define an obligatory maximum period of payment not exceeding 30 calendar days for all commercial transactions without derogation;
- Make the application of interest a legal obligation from the first day of late payment and apply the statutory interest for late payment in business-to-business relations;
- Define an obligatory maximum duration of 30 calendar days to ascertain the conformity of services or goods, starting from the day of the finished service or received good without derogation;
- If the main contractor exceeds the maximum payment period of 30 calendar days, ensure subcontractors can directly claim payment from the contracting authority as foreseen in the Public Procurement Directive;
- Improve legislation enforcement through proportionate administrative sanctions;
- Allow enterprises to hold back tax payments on services and goods delivered until payment for them is received;
- Set-up and promote mediation and adjudication measures at the regional and local level;
- Increase support for credit management education and training.
| “Late payment has a grave influence on enterprises and especially SMEs by blocking time and resources that hamper investment and by raising cash-flow issues that may even lead to business closure. Hence it is essential to ensure a stronger legal framework without unnecessary and harming derogations and with better enforcement to foster a prompt payment culture in the European Union”, emphasises Eugenio Quintieri, EBC Secretary General. |
To read EBC position paper on combating late payment, please click here