From the top · 23 March 2017

Jeremy Corbyn announces payment cap to end “national scandal” and support small suppliers

Payment cap
A payment cap of 30 days was proposed by the Labour leader to ensure better supply chain practices

Labour Party leader Jeremy Corbyn has declared the UK’s late payment culture a “national scandal”, and will impose a payment cap on big business supplier payments should the party come into power.

Corbyn is set to use a speech at today’s (23 March) Federation of Small Businesses (FSB) National Business Conference to announce plans for a 30-day deadline for all payments invoiced to small suppliers from large businesses.

In a statement, Corbyn said that big businesses were “holding cash piles” that rightfully belonged to suppliers.

“Cash is king for any business and big companies are managing cash by borrowing interest-free from suppliers,” Corbyn added.

New data from the Labour Party has highlighted the impact of poor payment practices throughout the small business supply chain. Statistics showed that owners at 160,000 small firms in London have been unable to pay their own suppliers on time. In turn, some 63,222 were forced to pay employees late.

Corbyn’s pledge of a 30-day payment cap arrives after Asda suppliers revealed new terms imposed by the retailer. Asda was found to have extended invoice waiting times by 50 per cent. Small business owners supplying the store now must wait 90 days before receiving payment.

“We have recently undergone a further review of our payment terms and having considered the situation carefully, we have now made the decision to extend terms to 90 days,” wrote Asda’s chief financial officer, Andrew Moore, in a letter to suppliers.

The government’s solution to the late payment crisis has been to introduce dedicated small business commissioner to champion the rights of suppliers in payment disputes.

Applications for the commissioner have now closed, and the Department for Business, Energy and Industrial Strategy (BEIS) has stated the successful candidate will have the pedigree to effectively speak for small business owners.

With the government and opposition stances now clear, what is the opinion of the UK’s community of small business owners?

A survey taken by Business Advice readers revealed a striking lack of confidence in the incoming commissioner’s powers to tackle late payments. When asked if the commissioner could improve their payment situation, over eight in ten responded “not at all”.

Our research also underlined the extent to which payments are withheld. Almost a third of readers claimed to have between £20,000 to £50,000 in unpaid invoices. Just four per cent regularly received payments on time.

While Corbyn’s payment cap goes some way to put further control in the hands of suppliers, the greatest concern for small suppliers could be the payment terms themselves.

Read our story on why the real scandal could be unfair payment terms

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and previously worked as a content editor in the ecommerce industry.

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