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FPB calls on public sector to stick to 10-day payment target dispite new 30-day Euro standard

The Forum of Private Business is calling on the UK’s public sector to retain its target of paying small firms in 10 days following a new ruling to make 30 days the standard across the European Union (EU).
The European Parliament and European Council have agreed to new legislation amending the EU Late Payments Directive in order to address the widespread problem of late payment across Europe, including imposing a standard 30-day deadline for payments.

While welcoming the development, the Forum is concerned many public sector bodies could abandon the UK's own domestic 10-day target, which was announced in 2008.

'If approved by the European Parliament, as expected, these new rules under the Late Payments Directive should make significant inroads in tackling the £24billion hole in the UK's economy caused by late payment to small businesses,' said the Forum's chief executive Phil Orford.

'However, although it is still not a widespread success across the public sector, abandoning the UK's domestic 10-day payment target would be a significant step backwards in tackling the culture of poor payment.

'Central government departments, for example, are largely meeting the 10-day target and it is important the UK's public sector continues to strive to set the standard for other countries and private companies to follow.'

The Forum is pleased the European Commission's initial proposal to allow debtors and creditors to agree payment terms separately has been scrapped.

According to members of the not-for-profit business support and lobby group there is rarely any scope at all for a small business supplier to properly negotiate terms with large customers, so this would have effectively amounted to an opt-out clause for many big businesses.

If a payment is late, authorities will have to pay a surcharge of 8% on the money owing, as well as fixed compensation of €40 (approximately £27) for the creditor's recovery costs.

Although 30 days has been deemed standard, in exceptional circumstances most public authorities can extend this to 60 days if they have special justification.

However, public healthcare providers can be afforded a maximum deadline of 60 days because of the special nature of bodies such as public hospitals which are, according to a European Parliament, statement 'largely funded through reimbursements under social security systems'.

This exemption risks undermining work carried out in the UK which has led to some NHS trusts paying within the 10-day target and could prevent others from improving their payment times.

Research carried out by the Forum has discovered some NHS trusts are paying more than 90% of their bills within 10 days.
16 September 2010

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