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New EU Directive good news for food processing sector?

11 March 2013

The Department of Business, Innovation and Skills looks set to embrace both the spirit and the word of the new EU Directive on Late Payment that comes into force on March 16, 2013.

The Directive, which will impact the payment behaviours and cultures of all businesses working within the food processing industry, will replace the existing rules and oblige businesses to pay their suppliers within a 60 day period unless they expressly agree otherwise.

The Directive is also looking to penalise late payment with an increase in statutory interest to 8% over the reference rate and a provision to award compensation to suppliers for the cost of recovering a debt.

In principle, suppliers will welcome tougher provisions for debtors who do not pay what they should, when they should. The difficulty is that they might introduce elements of uncertainty into business transactions, including what is required for a contract to have been ‘expressly agreed’ and how will a business be able to prove what is ‘grossly unfair’. And neither the new nor the old provisions will assist suppliers where the debtor is the consumer, or where the debtor has entered a formal insolvency process.

Euler Hermes, whose new ‘Simplicity’ credit insurance package helps businesses manage their risk and protect them from non-payment from their customers, welcomes the attention that the new Directive is bringing. 

“Trade credit is essential for enabling companies to do business,” says Lukas Neckermann, commercial director of Euler Hermes UK (pictured). “Understanding and managing the risks within the supply chain is critical to the future growth and prosperity of the food processing industry, and that means having safeguards in place should something go wrong, or the unexpected happen.”


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