Derek Vaughan MEP

Working hard for Wales in Europe

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Is the cheque really in the post? Welsh businesses win new rights to challenge late payers

Welsh businesses have won new EU rights to tackle companies that pay bills late.

Under rules agreed by the European Parliament this week businesses will be legally entitled to insist on a 30 day deadline for the payment of bills - and impose penalties where companies don't pay in time.

Local Labour Euro MP, DEREK VAUGHAN, backed the new measures in Wednesday's vote. He said:

"These new rights mean that Welsh businesses can no longer be fobbed off with claims that 'the cheque's in the post'.

Late payment is a major issue for many small businesses, which rely on bills being paid promptly to cover their costs, including staff wages.

After the agreement we've reached this week the government must act to introduce rules so that companies can demand payment in 30 days. And if organisations pay late, businesses will be able to impose penalty charges.

Many businessmen and women in Wales have spoken to me about the cash-flow problems they face because their clients pay late. They report that the worst offenders are big companies which can often sit on bills for months without paying them.

That's not just unfair to small businesses - it actually threatens their viability."

The new rights will also help smaller businesses when negotiating contracts with big clients. At present many large companies use their weight to demand that small suppliers agree to very long payment deadlines - sometimes of many months.

While longer payment deadlines will still be possible under the new rules, there will need to be a clear justification for extending the payment period. The need for a client to justify an extension will make it easier for smaller businesses to insist on the normal 30 day period.

Mr Vaughan added:

"The new EU rights will put small businesses on a firmer footing when negotiating with bigger players. Just because a company has financial muscle shouldn't mean it's able to push smaller companies into unfair deals."

The EU rules must now be enacted by the British government, which has two years to pass new rules, although Labour MEPs are calling for the government to bring in the new rights faster.

The 30 day deadline will apply to all business-to-business contracts. If payment is not made within the deadline then businesses will be able to apply a fixed penalty of around £35 to cover administration costs plus a variable penalty fee linked to cover interest and other costs.

Further information can be found at: http://www.europarl.europa.eu/news/public/focus_page/008-86242-281-10-41-901-20101008FCS86210-08-10-2010-2010/default_p001c014_en.htm

 

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