Government’s Small Business Bill does not address ‘cultural issue’ of late payment

Although I welcome the fact that some of my cross-party inquiry recommendations are being set in law, the government’s Small Business, Enterprise and Employment Bill does not go far enough on addressing the cultural issue that underpins and drives late payment.

The Bill fails to stand up to powerful vested interests on behalf of small businesses and the millions of people they employ. The business associations I have spoken to see the Bill as a ‘massive disappointment’ on late payments, and I will be tabling amendments to address these issues.

The fundamental finding of the cross-party inquiry I held last year, was that late payments reflect the culture of a company, which is ultimately down to the company’s leadership. Late payments are a form of corporate bullying, because large companies are able to exert their power over small companies.

There is a power imbalance between the large companies and the small companies, and late payment needs to be seen as being as unacceptable as tax evasion.

I am pleased to see that some of the issues raised by the cross-party inquiry I held into late payments last summer have been acted on, for example the need to review the misused Prompt Payment Code.

Other recommendations for example to require fair payment terms for all the supply chain of public contracts have been watered down, after the Government promised that they would be introduced. But there was little to celebrate for business to business contracts; even article 7 of the EU late payment directive which gives redress for small businesses owed money from late payments whilst protecting their anonymity hasn’t been enacted by the Government. And, as I say, the key issue to tackle the abuse of power by large companies has been ignored by the Government.

This is a great boost to everyone who has supported me and my partner organisations, such as the Federation of Small Businesses (FSB) and the Forum of Private Business (FPB) and the Specialist Engineering Contractors’ Group, in the Be Fair – Pay on Time campaign because we can now see real results from our hard work.

At every step of the campaign, whenever we have achieved good publicity, we have forced the government to take more action in this area albeit half-hearted. So we must keep up that pressure if we are to make a real difference to small and medium enterprises around the issue of late payments.

Professor Rudi Klein, CEO of Specialist Engineering Contractors’ Group, and a supporter of the Be Fair – Pay on Time campaign, believes the Bill is a massive disappointment insofar as combating poor payment practices is concerned. He  has spoken about his immediate reaction to the Bill saying that it will be “wholly ineffective to change the payment culture especially in the construction industry.”

Richard Gregg, Regional Chairman for the Federation of Small Businesses in Manchester and North Cheshire, has explained exactly whey the government needs to get this Bill spot on. Following a survey of last year, 50% of members told the FSB that they were paid late by at least one of their business customers. He also said that new research from Bacs shows the debt of overdue invoices for SMEs had grown by almost £10 billion pounds in the last 12 months, increasing the debt to £40 billion, demonstrating that the situation is deteriorating rather than improving.

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