Business minister Michael Fallon today published a consultation on implementing EU rules to tackle late payment.
Under the EU directive, business to business payments should not exceed a fixed contractual payment period of 60 days, unless it is expressly agreed and provided such terms are not deemed to be grossly unfair.
Public authorities will also have to pay suppliers within 30 calendar days of the receipt of an undisputed invoice, matching the UK government’s public sector standard practice.
The news comes as CN revealed this week that housebuilder Keepmoat was moving to extend its payment terms by almost half.
The default UK position, backed up in the EU directive, is that where no terms are agreed, payment should be made in 30 days.
Michael Fallon hailed the UK’s rules as “some of the strongest late payment laws in Europe, which are now being copied across Europe”.
“This will give a real boost to UK business by providing them with the confidence and certainty they need to work with overseas suppliers”, he continued.
“But legislation alone cannot deal with the issue of late payment. Businesses need to make sure they have suitable measures in place to help themselves. Tackling late payment will free up millions of pounds in the supply chain, helping to boost the economy and safeguard the future of thousands of UK companies.”
The consultation will run until 19 October 2012, with transposition of the directive due to take place on 16 March 2013.
Government figures are encouraging businesses to sign up to the Prompt Payment Code of good practice, with 1,100 business currently signed up.
The EU legislation would also provide a minimum level of compensation at £31, while UK law currently sets three compensation levels according to the value of the payment in question.
Suppliers will not be prevented from attempting to claim extra recovery costs.