Late payments prolific across most European supply chains

More than eight in 10 small firms (85 per cent) within European supply chains report persistent late payments, a new study has revealed.

The Federation of Small Businesses (FSB), which published the report, said the issue of poor payment practices “continued to persist across Europe” despite the introduction of the Late Payment Directive.

While the Directive states that the maximum payment term cannot exceed 60 days, the research shows that one in four (22 per cent) of small businesses report payment terms of over 60 days, while more than a third (37 per cent) have seen their payment terms increase over the past two years.

Mike Cherry, National Chairman at the FSB, said that late payment culture was “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,” he said.

“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.”

The FSB has called on the European Commission to introduce new rules which it hopes will strengthen existing initiatives and improve payment practices for small businesses.

This includes strengthening small firms’ legal protection, introducing a duty to report on payment practices for large companies and appointing a sector-specific ombudsman for those industries which are most at risk of late payments.

Mr Cherry added: “Whether for services or goods 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.”