Britain’s Late Payment Culture Getting Worse
The Federation of Small Businesses wants Chancellor Philip Hammond to take action on late payment. Britain’s late payment culture is getting worse, a leading business group says.
New research by the Federation of Small Businesses – released just before the Chancellor’s spring statement – reveals that 84% of small firms have been paid late, with a third (33%) saying at least one in four payments they are owed has arrived later than agreed.
A similar proportion (37%) say that agreed payment terms have lengthened in the past two years, hampering cash flow, while only 4% say payment terms are improving.
The issue of late payments – which The Journal first highlighted with its Pay Fair campaign in 2014 – has been blamed for hundreds of business failures in the region, and came back to the fore when outsourcing giant Carillion went bust.
The Government set up a Small Business Commissioner at the end of last year to tackle issues around unfair business practices but there has been frustration that situation appears to have got worse rather than better in recent times.
FSB chairman Mike Cherry said: “Small firms will applaud healthy public finances off the back of responsible management. However, what they need to see day to day is large corporations taking a similarly responsible approach to paying suppliers. Small firms currently have billions withheld from them by large companies that pay late. Our late payment crisis causes the closure of an estimated 50,000 businesses a year, costing the economy £2.5bn annually.”
“The collapse of Carillion saw the dangers of poor payment practice writ large. The sorry episode has cost jobs and ruined lives. Improving the nation’s productivity forecasts starts by speaking out on late payments today. In doing so, the Chancellor will send a clear message to British boardrooms. The late payment crisis will only end when we see a fundamental cultural shift in the boardroom, with those at the top collectively addressing the issue, and directors held accountable for supply chain support.”
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The FSB survey is backed up by similar research by financial group Close Brothers, which found that almost a quarter (24.2%) of SMEs now regard late payment as a problem for their business. While that figure was a reduction from the 33% of firms reporting problems two years ago, there was an increase to 25.2% of companies that were owed more than £40,000.
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In the North East, organisations like software firm Sage and insolvency trade body R3 have also raised the problems caused for small businesses by late payment and other forms of supply chain bullying.
