SPANISH TOWN PLUGS SIX MONTH GAP IN EU LAW
Spanish Town Of Sant Cugat del Valles Sets European Standard For Public Sector Payment Terms
The Town Hall in the Spanish town of Sant Cugat del Valles near Barcelona has unveiled a innovative system for paying its suppliers six months earlier than a new EU law which comes into effect in October 2009.
Public authorities will have to pay contractors within 30 days or face financial penalties, as part of an amendment to the Late Payments Directive tabled by the European Commission.
The move will benefit SMEs that win public contracts by improving cash flow, and will inject billions back into the economy.
However, research carried out last month by the Town Hall in the Spanish town of Sant Cugat del Valles near Barcelona, calculated that speeding up public sector payments across Europe would inject 46 billion Euros back into the economy, almost over night and has unveiled a system to speed up their own payments to suppliers.
The news of the EU legislation has further endorsed the Town Hall’s belief that reducing payment terms can help suppliers – and the economy generally.
Sant Cugat del Valles Town Hall has involved two leading banks in making even faster payments to their suppliers; Banco Santander & Banco de Sabadell.
“Our payment term at Sant Cugat is currently 60 days, but many of our suppliers state a 30 or even 15 day term and require faster payments – they are small businesses and rely on strong cash flow to survive, especially in the current economic climate,” said Lluis Recoder, Mayor of Sant Cugat del Valles.
“The new legislation will speed up payments across most authorities, but in conjunction with the new system in San Cugat, it will make payments even faster than 30 days in some cases.
“We have put in place an agreement with two leading banks whereby they will pay an invoice faster on behalf of Sant Cugat Town Hall – the cost to the businesses will be based upon the Euribor at +0.95% (Banco Santander) and +1% (Banco de Sabadell) for up to 30 days payment.
“We feel it’s important to support local businesses during the tougher economic climate – and for some that means receiving payments faster than our stated terms – we welcome the new EU legislation.”
Josep Maria Martí Escursell, CEO Moventia, a private transport company in San Cugat comments; “The new system is a lifeline to businesses in San Cugat – cash flow is the most important thing and this gives us the ability to control when we receive payment.
“Being in a position to accurately control and financially plan during a recession makes doing business much easier and more secure – which can only be a good thing for everyone – employees, businesses and the economy generally.”
Antoni Abad, President of CECOT (Confederacio Empresarial Comarcal de Terrassa), an independent ‘chamber of commerce’ for businesses in the San Cugat area said; “This is a revolutionary step to take to help small and medium sized businesses in San Cugat – we’ve had very positive feedback from our business members and we’re extremely pleased to see the Town Hall take a step to support the local economy, as well as set a precedent for others.”
The statistics* were analysed by looking at the public sector payments of 23 European countries and comparing payment terms with actual payment dates. The associated delays were then calculated and a table of best and worst offenders was created.
The top five worst offending countries for late payments were; Portugal (80 days overdue), Greece (62), Hungary (55), Spain (41) and Italy (40). The Nordic countries of Finland, Sweden, Iceland, Norway and also Estonia were the best payers with payments ranging between 4 and 7 days overdue.
The UK was ranked 10th worst payers out of 23 countries at 18 days overdue, Germany 12th worst at 15 days overdue and France 14th worst at 14 days overdue.
“The delays equate to money that would otherwise be back in the economy and helping small suppliers with cash flow,” said Lluis Recoder, Mayor of Sant Cugat del Valles.
“It’s important to us to improve our own situation and to set the standard for the rest of Europe to follow if possible. It’s easy to see how just paying invoices on time can help not only the suppliers, but the economy generally.”