He had seen the estimate by the Federation of Small Businesses in Time to Act: The economic impact of poor payment practice that large companies neglecting to settle their bills cause about 50,000 businesses to fail every year.
Research from Lloyds Banking Group, which analysed the companies that reported their payment practices, found that 65% took more than 30 days to settle invoices and 21% took more than 50 days.
And the Small Business Commissioner (SBC), set up in December 2017 to help the UK’s 5.7 million small businesses tackle late payment, adds:
- a third of payments to small businesses are late;
- 20% of small businesses have experienced cashflow problems due to late payments;
- and that if small businesses were paid on time it could boost the economy by an estimated £2.5 billion annually.
James Hurley, Enterprise Editor, had earlier explained that rules have been designed to force large companies to reveal how long they take to pay their suppliers: companies who meet two of three qualifying criteria: £36 million annual turnover, an £18 million total balance sheet or at least 250 staff.
But there is a loophole: where services are contracted and paid for by group subsidiaries that fall below these thresholds, there is no duty to report.
Debbie Abrahams, the Labour MP, said that suppliers would “continue to be unfairly squeezed” unless the loophole was addressed and other MPs, together with representatives of small companies, are calling for the “duty to report” legislation to be rewritten.
One example is that of G4S, the outsourcing group, was criticised by Paul Uppal, the small business commissioner, for “persistent late payment” of a supplier. G4S, a member of the FTSE 250 share index, paid this supplier through a subsidiary that does not meet the threshold.
The legislation has not yet been rewritten, though a report published by the government’s Business, Energy and Industrial Strategy (BEIS) Committee last December acknowledged the truth of these allegations and urged government to introduce a tougher regime to tackle larger companies who treat small businesses ‘disgracefully’ by enforcing long payment terms, paying their suppliers late or using the ‘loophole’ to evade scrutiny.
The subject of late payment should appear in Labour’s election manifesto