New report holds spotlight over government action on late payments
Effective action into the UK’s late payment culture would have saved 50, 000 small businesses from folding in 2014 saving the country 2.5bn, according to a new report from the Federation of Small Businesses (FSB).
The study highlighted the true impact of late payments to small companies, suggesting that government intervention into tackling the problem has so far failed.
The Time to Act: The economic impact of poor payment practice? report revealed that a third of all invoices to small suppliers are paid late by larger companies despite policies such as the Prompt Payment Code (PPC) and the proposed small business commissioner aiming to bring about a culture change with so-called ‘supply chain bullies.
The research also predicted that if small companies experienced no late payments in 2016, profit growth for such firms would be on average 2.6 per cent higher representing an extra 4.8bn in economic value.
In a statement, Mike Cherry, FSB national chairman, claimed that the research demonstrated the need to address late payments from both an ethical and an economic point of view.
Cherry criticised the imbalance of power? that existed in the UK’s business culture, and said that late payments created a chilling effect right across the economy.
He added: ‘small businesses have to run a tight ship with their cash flow, and as they struggle with increasing business costs on one hand and an uncertain domestic economy on the other, they should not also have to struggle with the stress, time and money required to chase overdue payments from corporate giants.
In response to the study’s findings, the FSB put forward a series of policy initiatives that it says will be crucial in creating a supply chain that works for small businesses.
The organisation has called on the Department for Business, Energy and Industrial Strategy (BEIS) to end the small business commissioner consultation period and install the post immediately to represent the interests of small businesses. It has recommended that the commissioner be given powers to name and shame? consistent offenders of late payments.
Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.
Small business minister Margot James has reiterated her support for measures that will encourage better payment practices towards small firms, in a letter to signatories of the Prompt Payment Code (PPC). more»