Late Payments Killing Small Businesses

1.05.21pm BST (GMT +0100) Wed 21st Apr 2004

Late payments force 1 in 4 firms to fold, and the situation is likely to get worse as more large companies flout the law on disclosure of their payment records. Research on behalf of the Federation of Small Businesses shows that PLCs do not take the issue of late payments seriously. They are holding small businesses to ransom.

By law, companies are obliged to disclose their payment records, but an increasing number are refusing to comply.

In 2001, 4,100 PLCs published the information. By 2003, this had fallen 66% to just 2,706.

Brian Cotter MP, Liberal Democrat Small Business spokesman, has tabled a parliamentary motion calling on the Government to take tough action against those companies.

Brian Cotter MP commented; "When small businesses fold, it damages the economy. But when the cause of closure is late payment by larger companies, this is particularly galling."

"Small businesses need prompt payment to continue trading."

"Despite the introduction of late payment legislation, large firms still owe small businesses a net debt of approximately £20bn."

"Until the Government gets tough with late payers, the £20bn will sit in the coffers of large companies instead of driving the continued success of the small business sector."

"Those that fail to pay on time should be named and shamed in an annual list, so that small firms can judge their payment record and make an informed decision before entering into business with them."

ENDS

Notes

• Below is the link to the FSB estimate of one in four firms failing due to late payment. http://www.fsb.org.uk/news.asp?REC=P2004/15

• Last week, the Federation of Small Businesses (FSB) published the payment performance of over 2,700 plcs for the fifth year running. The research shows that the average length of time it takes a PLC to pay its suppliers remains at 46 days, the same figure as 4 years ago. In addition, only 2,706 companies disclosed their payment records in 2003, representing a 66% drop since 2001, when 4,100 PLCs published the information. www.cmrc.co.uk/leaguetables

• The Private Sector Payment Performance League Tables 2003/4 are available online at www.cmrc.co.uk/leaguetables and www.payontime.co.uk

Text of Late Payment Early Day Motion 1007

Late Payment

Brian Cotter

That this House notes with concern the fifth payment performance table recently published by the Federation of Small Businesses (FSB) which shows that PLCs in the UK have made no improvement in the time it takes them to pay their bills over the last four years; recognises that despite the introduction of statutory interest rights, late payment remains a major problem for small businesses, with large businesses owing small firms a net trade debt of around £20 billion; expresses further concern that the late payment of commercial debt is forcing an estimated 10,000 small firms out of business each year and restricting the cash flow of countless others; recognises that the Government is failing to lead by example given the outstanding £55 million DEFRA still owes contractors for work carried out during the foot and mouth epidemic; condemns the fact that around 73% of companies are failing to meet their legal obligation to file details of their payment records in their annual reports and laments the fact that the DTI is failing to ensure that this legislation is enforced properly; therefore calls upon the Government to lead by example by settling its own outstanding debts, introducing an annual register to name and shame those PLCs that consistently fail to pay their bills on time, introducing a single standard for reporting payment records and imposing tougher penalties on those companies that fail to disclose these details as required by law.