The new head of the Federation of Small Businesses (FSB) has told the government the UK’s late payment culture is hurting the ability of SMEs to deal with spiralling costs.
In an audience at Number 10 Downing Street, Martin McTague, who was appointed chair of the Federation in March, spelled out his concerns about the economic challenges facing the UK’s five million small businesses.
High on the list was the on-going issue of late payments, which McTague said was holding back post-COVID recovery in the SME sector and causing unnecessary financial distress as inflation hit a 40 year high.
Speaking to the FT after his audience at Number 10, McTague said: “About 60 per cent of small businesses say that late payment is an issue. Every one of those businesses has to have extra working capital to cover those delays, which means that they don’t have money for training or to invest in new equipment.”
The FSB chair argued that this was creating a toxic situation for small businesses who were already struggling with major cash flow challenges in the face of rising energy, transport and material costs.
Pressure to act
He called on the government to double down on its commitments to tackling late payment culture among larger businesses, starting with holding its own big suppliers to account. He also raised the controversial dropping of the proposed audit and corporate reform bill from the legislative programme announced in the Queen’s speech, arguing that this would have been an opportunity to demand responsibility for payments at board level.
“We’ve taken this message right to Number 10,” said McTague “[Downing Street chief of staff] Steve Barclay was very alive to the issue, which was encouraging.”
The FSB chair’s direct intervention to Downing Street ramps up the pressure on the government to back up tough-sounding rhetoric on late payments with long overdue meaningful action.
Especially in the wake of the pandemic, the flagrant disregard for payment conventions shown by far too many big businesses is a direct threat to the viability of hundreds of thousands of SMEs - and exposes the government’s lack of response further still.
In March, we reported how the government’s own Small Business Commissioner had issued dire warnings that the late payment crisis was only likely to get worse and suggested that as many as a third of UK SMEs were in financial danger because of it.