The construction sector is particularly affected by late payments, because of the characteristics of its value chain but also because construction companies usually have the obligation to perform the construction at their own expense (material, machinery, personnel) before getting paid. The low profit margins in the sector are aggravating the problem and make companies – be it small and medium-sized companies (SMEs) or large contractors – vulnerable to cash flow difficulties. Late payment can thus endanger the mere existence of a construction company as a positive cash flow is essential to ensure the daily functioning of a company.
In February 2011, the EU adopted the Directive on combating late payment in commercial transactions (2011/7/EU). The Directive was to be transposed into national law by March 2013. Since then, several assessments have been carried out revealing that the impact of the Directive has been limited so far. According to the EU, the Late Payments Directive triggered a reduction in payment delays but more than 60% of EU businesses are still not paid on time, and SMEs are most affected.
Against this background, the European Commission is looking to update EU rules on late payments. As such, it held a public consultation in early 2023 to give stakeholders a chance to share their views, concerning the way the initiative contributes to improving payment performance and building a fairer payment culture in the business environment. FIEC responded to the consultation, highlighting in its answer several factors that contribute to late payment (e.g., existing rules being unclear or not properly enforced) and stressing the importance in tackling late payments in transactions with public authorities.