UK Exporters can look forward to new late payment protection

Research carried out by the Credit Management Research Centre (CMRC), a member of the Better Payment Practice Group, has highlighted concerns from UK exporters about the effect of late payment on their business. However, the good news for these businesses is that the EC Directive on Late Payment, which comes into force on 7th August, will provide exporters with a greater ability to recover commercial debt when trading in Europe.

Initial findings from the April study of 15,000 UK exporters for the 2002 GERLING NCM Export Survey, revealed that 84 per cent of companies were concerned about the possibility of a bad debt when dealing with customers. Two thirds of firms reported that businesses are taking longer to pay and 69 per cent felt they were spending too much time chasing payments.

The new EC Directive on Late Payment has been created to provide a ‘level playing field’ for European trade and help reduce payment times throughout Europe. Important features include:

• A European wide statutory right to interest at a rate of at least seven per cent over the European Central Bank rate;

• The right to reasonable debt recovery costs;

• The right for a representative body to challenge grossly unfair contract terms on behalf of small and medium-sized businesses.
  

From 7th August 2002 all European countries are required to have the EC Directive’s late payment law in place. Some countries have already complied with the legislation while others are currently implementing final requirements. The UK was one of the first countries to bring in late payment legislation and is amending the third phase of the existing Late Payment of Commercial Debts (Interest) Act to incorporate the provisions of the EC Directive.

Professor Nicholas Wilson, Director of the CMRC and member of the Better Payment Practice Group comments: “It was not surprising to find that 96 per cent of businesses surveyed believe cashflow is the most important factor in achieving commercial success. The EC Directive should bring about some peace of mind, but it should be remembered that there is no substitute for good credit management techniques to help improve cash flow and minimise the incidence of late payment.”

The full results of the Export Survey are available at a press conference on 1st July 2002 in Westminster, London. GERLING NCM insures £50 billion of UK trade against the risk of non-payment. Further information about the EC Directive can be obtained from this website. Further research information can be found at www.cmrc.co.uk

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