Despite the introduction of the Late Payment Directive, the issue of poor payment practices continues to persist across Europe.
The vast majority (85%) of small firms that operate within European supply chains report being paid late, according to research from the Federation of Small Businesses (FSB).
Despite the Late Payment Directive's rules on maximum payment terms of 60 days, a new FSB report has found that 22% of small businesses report payments terms of over 60 days, while more than a third (37%) of FSB smaller suppliers say that their payment terms have increased over the past two years.
According to the FSB, supply chain bullying continues to be a major issue in the EU; the report finds that 12% of small businesses have been asked for a discount in return for prompt payment.
The FSB is calling on the European Commission and EU member states to introduce changes aimed at strengthening existing initiatives to help improve the payment culture in the EU. These include:
- Strengthen small businesses' legal protection against lengthy payment terms by more precisely defining the term 'grossly unfair' as used in the Late Payment Directive;
- Issue a recommendation that all member states introduce a duty to report on payment practices for large companies or introduce such a requirement via any reform to the Late Payment Directive;
- Appoint sector-specific ombudsmen for those sectors that are most at risk of late payments, starting with the food supply chain and construction.
FSB national chairman Mike Cherry, said: "Poor payment culture is a problem without borders, damaging small businesses in the UK and across Europe. It is an issue that has persisted for far too long and the time has now come to ramp up efforts to shift the cultural dial on poor payment practices in the EU.
"Even with the UK leaving the European Union next March, the reality is that the EU single market will remain the biggest market for British small firms for the foreseeable future. This is why it is vital that a culture of prompt payment flourishes across Europe.
"Whether for services or good delivered locally or cross-borders, paying on time is the moral and right thing to do - pure and simple. It is a win-win for everyone involved in the supply chain and the wider economy. When treated right and paid on time, small firms create jobs and growth that benefit us all."