Wednesday, 09 May 2018 12:16

Small Businesses Demand Law to Stop Late Payments

Small business owners want the UK government to outlaw late payments as new figures reveal that half of SMEs face financial stress due to not being paid on time.

In a new survey carried out by YouGov and reported by The Sunday Times, 61 per cent of small business owners strongly support the suggestion that the government should legislate to force companies to pay suppliers on time.

The idea put forward in the survey was to create a mandatory 45-day payment term for all invoices. Not only would such a move strengthen the hand of small suppliers and contractors when payments become late, it would also curb the practice of big businesses imposing punitive conditions, such as the notorious 120-day terms collapsed outsourcing giant Carillion insisted on.

Just 11 per cent of firms with fewer than 250 employees are opposed to the idea of legislation.

Pushed to the edge

This latest indication of the anger felt amongst the UK’s small business community about late payment culture came as another survey found that a shocking 50 per cent of SMEs have been on the verge of liquidation as a direct result of payments not arriving on time.

Small business owners blame cash flow problems arising from late payments on stress, anxiety, depression and even having suicidal thoughts. Almost two thirds (63 per cent) said they had not paid themselves a wage ‘for some time’ because of a lack of cash from unpaid invoices, while a third said they had struggled to pay business rates (31 per cent) or rent (35 per cent).

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In the wake of the Carillion scandal, there is a growing feeling that the government may finally be prepared to act to clamp down on the endemic abuse of suppliers by many of the UK’s biggest firms.

The collapse of the country’s biggest public sector contractor not caused outrage when it emerged that suppliers faced receiving just 1p in the pound on unpaid contracts - while bosses had known full well the company was in financial difficulties for months previously. It also shone a light on some of the worst excesses of ‘supplier relations’, right on the government’s doorstep.

Last month, Paul Uppal, the government’s small business commissioner (SBC), told a Parliamentary committee looking into late payments culture that he thought firms should face heavy fines for paying late. The office of SBC was created last year with a remit to look after the best interests of small businesses, including the option to ‘name and shame’ big businesses who abused their relationships with suppliers.

Clearly, like the rest of us, Mr Uppal does not believe naming and shaming goes nearly far enough. It is time the government showed its hand on late payments.

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