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EU plans to crackdown on late payments welcomed

. The European Commission has taken a “significant step” towards addressing the challenges faced by small and medium-sized enterprises (SMEs) and crafts in the construction sector.

This, it is said, comes after the EC proposed a new Late Payment Regulation (LPR) that will replace the existing Late Payment Directive, in the context of its SME Relief Package. 

The European Builders Confederation, or EBC, said it “welcomes this long-awaited proposal that aims to foster a fairer payment culture in the EU, ensure investment capacity to achieve the Green Deal, and strengthen the financial sustainability of construction.”

The construction sector, it says, plays a crucial role in Europe’s economy, providing jobs and contributing to the development of infrastructure and communities across the continent. 

“However, SMEs and crafts in the construction sector have long been grappling with the issue of late payments, which can have severe consequences on their financial stability and activity prospects, leading even to bankruptcies,” the EBC says.
In a recent economic climate where inflation has acted as a fertiliser for late payments, many companies have been forced to accept even longer payments than they are comfortable with, it adds.

“This bad payment culture acts also as an obstacle to the green and digital transition of the EU.”
The European Commission’s proposal, designed to address these challenges, introduces a range of measures that will be particularly impactful for SMEs, notably in the construction sector, says the EBC.

Key highlights of the proposal include:

  • the Directive becomes Regulation.
  • a 30-day payment cap.
  • Payments to subcontractors in public procurement. 
  • Automatic compensatory fees.
  • Removal of problematic concept of “grossly unfair”
  • Enforcement authorities.

Fernando Sigchos Jimenez, Secretary General of the European Builders Confederation, expressed strong support for the proposal, stating, “The construction sector is at the heart of our communities and our economies, even more so in times when our buildings need to become more energy and resource efficient. “The European Commission’s commitment to addressing late payments is a positive step that will significantly benefit our SMEs and crafts. Timely payments are essential for their activity and survival, and this proposal demonstrates a shared commitment to their success, that should be matched by the Council and Parliament.”

The EBC says, “the European Commission’s proposal for a Late Payment Regulation underscores its commitment to relieving all companies from the burdens of late payment, particularly important for SMEs and crafts in the construction sector. EBC will continue to advocate for an ambitious LPR, as the proposal will now undergo scrutiny by the European Parliament and the Council of the European Union.”

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