A new EU Directive on late payments, which increases the statutory payment period from 30 days to 60 days, is an “insult” to small enterprises, business lobby group Isme has said.
Under the directive, which is a recast of a directive published in 2000, public authorities must pay for goods and services within 30 days or, in exceptional circumstances, within 60 days.
Enterprises will have to pay their invoices within 60 days, unless they expressly agree otherwise and it is not grossly unfair to the creditor.
Businesses will be able to claim interest for late payment and to get a minimum fixed amount of €40 as compensation for recovery costs.
Speaking at the National Seminar on Late Payments in Dublin yesterday, Isme chief executive Mark Fielding said the legislation was working against small businesses.
The new directive would exacerbate the situation, he said, driving more enterprises out of business as larger businesses and government agencies delayed payments to smaller suppliers.
“We are telling the EU Commission, here today, and our own Government that their efforts on late payments have not worked for Ireland and have exacerbated the situation by allowing big business and Government agencies to contract out of the legislation, thereby abusing their dominant positions. The figures prove it.”
Irish businesses are among the slowest in Europe for making payments, taking an average of 66 days to settle their invoices, according to the European Payment Index 2012 published yesterday. The EU average is 52 days.
The Irish figure has continued to rise over the past decade despite the introduction of the late payments directive here in 2002. It was 58 days in 2008, 62 days in 2009, and 65 in 2010 and 2011.
Mr Fielding said the increase in the rate of interest chargeable for non-payment would make no difference, as small businesses are already being told that they will lose business if they attempt to charge the current rate.
“This market power and corresponding fear of harming commercial relationships is not being addressed by the new directive.”
The latest figures show 2.8 per cent of total turnover (or €4.5 billion) was lost in Ireland in 2012 due to late payment, according to credit management company Intrum Justitia, which compiled the Payments Index.
On a positive note, public sector organisations here are better at paying than many of their EU counterparts, taking about 48 days, while public sector bodies across Europe take on average 65 days, according to 2012 figures. In Greece, the average was 174 days, while in Italy, it was 180 days.
“The perception is that payment from public bodies is worse in Ireland, but the figures show that is not the case,” said Mark Ridout, the managing director of Intrum Justitia.
Mr Ridout said a survey conducted by Intrum Justitia found just 22 per cent of businesses were familiar with the EU late payments directive, while a further 60 per cent said they hadn’t seen any impact of it on businesses.
The directive is due to be transposed into Irish law in March. Antti Peltomäki, deputy director-general of the Enterprise and Industry Directorate-Generale, said adoption of the directive would mean a reduction in outstanding debt for SMEs. “We need to switch to a culture of prompt payment,” he said.
