Late payments costing EU companies billions

European governments could provide a €65 billion stimulus to the European economy simply by paying contractors on time, according to a new study released in Brussels yesterday.

The European Payment Index survey of over 5,000 companies in the EU showed that just half of all invoices in Europe are paid within 30 days.

The European Payment Index survey also reveals that the public sector is less reliable than private businesses and consumers when it comes to paying suppliers, taking an average of 37 additional days to pay invoices. The figures come in the wake of an updated Late Payments Directive from the European Commission which encourages public bodies to settle their bills within 30 days.

European businesses are estimated to spend some €25 billion per year chasing late payments from the public and private sectors, with small- and medium-sized enterprises feeling the pain particularly acutely.

Credit management services company Intrum Justitia, which conducted the survey, said member states could effectively inject billions of euros into their economies simply by paying bills in full and on time.

The data shows that just 50 per cent of all invoices are paid within 30 days, down from 53 per cent last year. Over 70 per cent of respondents across Europe believe that payment risks are set to increase further over the next 12 months, according to the survey. This compares with just 30 per cent of those who took part in the same survey last year.

Across European government, businesses and consumer groups, 2.4 per cent of all invoices have to be written off as bad debts, an increase of 0.4 per cent or €20 billion compared to the same period last year.

Although Malta is not included specifically in the study, as only companies in the largest EU economies were surveyed, a spokesman for Intrum Justitia said that the problem of late payments is also very common in Malta. In fact, he said, it has become worse because of the recession.

Late payments in Malta also contributed towards the widening of the deficit last year as Finance Minister Tonio Fenech pointed out to The Times last week. Mr Fenech said that private companies, including some major ones, last year delayed their payments of VAT and Income Tax in order to retain their liquidity. This has resulted in less revenue than expected in the government coffers.