Europe plans to curb late payment of debts: Governments warned to take voluntary action

THE European Commission is threatening to produce a directive aimed at curbing late payment of debts if member countries do not take voluntary action.

The warning was made by Raniero Vanni d'Archirafi, commissioner responsible for enterprise policy, at yesterday's launch of the second annual European Business Survey. He said the EC would recommend the move to European Union industry ministers next month.

The report, by accountants Grant Thornton and economic consultants Business Strategies, showed that late payment had slightly worsened from last year. The European average payment period was 65 days, with Danish companies the best payers at 36 days, and Italy's the worst at 90. The UK was among the better performers, with firms waiting 49 days to be paid.

The survey, claimed to be the most comprehensive ever made of the sector, also found that over-reliance on short-term finance threatened the expansion of many UK companies over the medium term.

It shows that 70 per cent of UK small and medium-sized enterprises (SMEs) use overdrafts and only 47 per cent use loans, compared with the continent's average of 57 per cent in each case. Only 6 per cent use factoring, which aids cash flow by allowing a company to have an advance on its invoices, compared with the European average of 11 per cent, and few take advantage of external equity.

Despite their funding problems, UK SMEs are more likely than their European counterparts to believe that their current funding sources are sufficient to support future plans.