A proposed European Union directive designed to crack down on late payment across Europe has come under fire from UK business groups.
The EU late payment directive, agreed by industry ministers last month, will allow small and medium-sized companies to charge interest on overdue payments at 6% above Bank of England and European Central Bank rates.
The higher rate will kick in 30 days after the invoice date – providing no prior agreement has been reached.
It is not yet clear to what extent the EU legislation will force governments to change national legislation.
The UK’s Late Payment Act allows small companies to charge interest of 8% above base rate after 30 days if no agreement has been reached with suppliers. With controversy triggered by Rentokil Initial’s 60-day payment policy, the UK Act has come under continued attack by UK small business groups. But the groups have questioned the practicality of the EU move.
Stephen Alambritis, head of parliamentary affairs for the Federation of Small Businesses, said: ‘It will be very difficult to enforce.’
The CBI also said it was opposed to any form of late payment legislation.
Nick Goulding, however, head of policy at the Forum of Private Business, welcomed the EU directive. ‘If a UK company is trying to export to a European country which has wildly different payment rules, it is very difficult,’ he said.
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