Menu
Thu, 28 March 2024

Newsletter sign-up

Subscribe now
The House Live All
Mission possible: Delivering tomorrow’s homes today Partner content
Economy
Data: driving the UK’s growth and productivity Partner content
Economy
Economy
Economy
Press releases

Tackling the 'scourge of late payments' on SMEs

3 min read

Conservative MP, Alok Sharma, welcomes the Government's plans to establish a Small Business Commissioner and says greater transparency is key to eliminating the 'disease' of late payments to small businesses. 

One of the biggest drags on small and medium sized enterprises (SMEs) is the scourge of late payment of invoices. Timely cash in-flow is the life blood of a small business. It is the difference between growth and stagnation. Between profit and loss. And, in some cases, between success and failure.

A recent survey by the Federation of Small Businesses (FSB) found that over 50% of invoices issued by SMEs to larger businesses are paid late and a study by BACS estimates that the cost to SMEs, including staff time spent chasing late payments, is a staggering £8.2 billion a year.

Within the Thames Valley area typical complaints I have heard from SMEs about large companies include pressure being applied to accept 90 -180 day payment plans, charging fees to remain an approved supplier, having to follow complicated processes for submitting invoices and, quite simply, delaying payment with no reasonable excuse.

In Britain we do have some large businesses which have, over years, developed a culture of late payment.  Squeezing small suppliers has been considered normal business practice and hang the negative consequences for the supplier.  The risk of late payment in Britain is considered to be higher than in many other European nations, according to the latest European Payment Risk Index. This culture of late payment and predatory corporate behaviour by some large businesses needs to stop.

I welcome the government’s plans to establish a Small Business Commissioner, who will help to solve complaints from small businesses about late payments from large companies. This will undoubtedly assist SMEs, but only if the Small Business Commissioner is seen to have real teeth.  If the Commissioner comes to be seen simply as a post box for complaints it will lose the confidence of SMEs and will not command the respect of large businesses.

The FSB want the scope and remit of the Commissioner to be broadened to consider complaints about poor payment practices in the public sector. And it also wants the Commissioner to have the power to make referrals to the Competition and Markets Authority.  Both suggestions are worthy of serious consideration by the government.

There are more than 5 million small businesses in the UK, many with late payment concerns, and the Commissioner needs to find a holistic way of dealing with complaints. The answer is certainly not to create a massive administrative bureaucracy, mechanically processing complaints.  

I would like to see the Commissioner establish a public register or website, loosely based on those that review holiday destinations, on which SMEs could enter verified complaints about late payments or poor supplier policies practiced by customers.  Once SMEs start coming forward with issues, many of which will be recurring in terms of scope and the identity of offending large companies, it will enable the Commissioner to spot patterns of poor behaviour within different sectors. The Commissioner should then have the power to bring CEOs from big companies around a table and ensure that they act collectively to end poor practices.

Eradicating late payments will provide a boost to jobs, growth and productivity.  And greater transparency will help in eliminating this corporate disease.  

Alok Sharma is the Conservative MP for Reading West

PoliticsHome Newsletters

Get the inside track on what MPs and Peers are talking about. Sign up to The House's morning email for the latest insight and reaction from Parliamentarians, policy-makers and organisations.

Read the most recent article written by Alok Sharma MP - We have less than 200 days to make COP26 a success – and save the planet

Tags

Business

Categories

Economy
Podcast
Engineering a Better World

The Engineering a Better World podcast series from The House magazine and the IET is back for series two! New host Jonn Elledge discusses with parliamentarians and industry experts how technology and engineering can provide policy solutions to our changing world.

NEW SERIES - Listen now