Weekly Blog by Philip King, CEO of the ICM - 'New Directive leaves authorities doing the maths'

So, the deadline for transposition of the EU Late Payment Directive 2011/07/EU finally arrives this Saturday and the UK government has met the deadline and even issued a Users’ Guide that can be found here.

 

I don't want to go into great detail about the Guide, Directive or Statutory Instrument here, but one paragraph in the Guide has really caught my attention. The paragraph in question within the 'Payment between public authorities and business' section says: ‘If you are a Public Authority..........If you do not pay within the deadline, you are obliged to automatically pay the outstanding amount that includes daily interest for every day payment is late based on 8 percentage points above the Bank of England’s reference rate plus the fixed amount, depending on the size of the unpaid debt. The onus is on you to pay your supplier on time and the supplier is not obliged to remind you that payment is outstanding."

 

The public authority customer is therefore expected to proactively recognise that it is paying late, calculate the late payment charges/interest and add the amount to the remittance regardless of whether the creditor asks for the amount or not! Now, I don't want to be a cynic but what are the chances of this actually working in practice? I can see all sorts of issues and difficulties: how, for example, are authorities going to know they are expected to do this? Who is going to make the calculation and approve the additional payment? How is the increased value going to be matched to the original purchase order? I'd be interested to hear views from readers with their opinion of how they see this working. Please email me at ceo@icm.org.uk or go to the ICM Credit Community LinkedIn group, or the Discussion Forum on the ICM website members area’ and let me know.

  

Finally, I have to mention Start-Up Loans. I'm privileged to have been involved on the Board of the company since its launch and I'm incredibly proud of its success as demonstrated by the announcement this week that the scheme has exceeded expectations as 2,000 aspirational young entrepreneurs have now received support (a loan supported by mentoring) to help get their business venture off the ground. The scheme has already reached its £10 million pilot spend, and a further £5.5 million injection of funding was approved this week in Parliament to fulfill its pipeline until the end of the month. The Government has made £117.5 million available to fund the Start-Up Loans scheme up to 2015. Amidst all of the sometimes dubious schemes our government has come up with in recent times, this is one where it appears to have got it right.