Late Payment: Commission launches public consultation to review Late Payment Directive

Back in in September 2022, EBC welcomed the announcement by the European Commission President Ursula von der Leyen of the upcoming review of the Late Payments Directive (LPD) as a pivotal component of the “SME Relief Package”. This long-awaited revision by construction SMEs and crafts is becoming increasingly tangible.

Last week, on Friday 20 January, the European Commission launched its Public Consultation on the LPD revision, that will remain open until 17 March. The consultation is taking place in the context of the Commission’s Call for Evidence launched earlier this month, which includes a feedback period running in parallel with the consultation.

With this exercise, the Commission aims to understand how late or unfair payments impact on the day-to-day management of businesses and their ability to invest in their green and digital transitions. The Commission seeks to collect information on the main features of payment terms used by businesses; interested parties’ experiences of unfair payment practices; views and experiences regarding the handling of disputes about payment delays; input on policy measures to combat late payments and the possible impact of policy measures to combat late payments; and, the overall impact of late payments on companies and other interested parties.

The Commission envisages thus to reopen the directive and take action to ensure that companies and in particular SMEs are paid on time, even more so considering the high uncertainty in business transactions over the last years. The construction sector and even more so construction crafts and SMEs are among the most heavily affected economic actors by overdue payment in the EU.

Indeed, EBC has long advocated for the need to show zero-tolerance vis-a-vis late payment practices, a lasting phenomenon that heavily disrupts the internal market and considerably impacts construction SMEs across the EU. Especially in the context of continuous crises phasing the European economy and construction , late payment has shown to have significant impacts on SMEs by several independent studies, suffocating their liquidity and even leading to bankruptcies and defaults. The importance of prompt payment was also recently showcased by a wide-reaching study of the Commission’s Joint Research Centre (JRC).

The current revision presents a once-in-a-decade opportunity to correct a long-standing unfair framework that puts construction SMEs in disadvantage and creates uncertainty and unreliability across the construction value chain and beyond. EBC therefore encourages policy makers to establish a strong and clear framework that will offer a level playing field across business to business (B2B) and public administration to business (PA2B) relations and transactions for all companies and will offer some much needed relief for our SMEs.

EBC will continue to follow the developments and position accordingly on this significant file for our SMEs and sector, and will continue to engage with all relevant stakeholders.

To read EBC’s position paper on Late Payment, click here