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Late payment of debts: welcome news for SMEs

Wednesday April 24th, 2013

The Government has introduced various measures over the last few years to seek to help small and medium sized enterprises (SMEs). The response published by the Department for Business, Innovation and Skills on the implementation on the EU’s new Late Payment Directive (2011/7/EU) reinforces this approach, albeit indirectly.

David Hansom

David Hansom

The response sets out the results of the Government’s consultation on implementing the Directive. In summary, it has been proposed that when implementing the Directive:

1                    The current 30-day payment period for invoices will not be extended to 60 days for public entities providing healthcare, or where public authorities are carrying out economic activities of an industrial or commercial nature by offering goods or services;

2                    The current sliding scale approach to what fixed costs can be recovered for late payment will remain unchanged instead of adopting a fixed figure as suggested in the Directive;

3                    The best way to implement the Directive is by amending the Late Payment of Commercial Debts (Interest) Act 1998 rather than replacing it; and

4                    The changes that are introduced by the Directive will not be retrospective. Contracts that were concluded before 16 March 2013 will therefore be excluded.

The devil is, as ever, in the detail, and the guidance may change between now and the final regulations. As currently proposed this change is relevant to all publicly procured contracts and will ensure that cash flow is maintained, which is a particular issue for SMEs, charities and third sector bodies which are increasingly bidding for public contracts.


David Hansom


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