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The amendment proposes that the largest companies in Britain complete a quarterly report – in the same manner as a VAT return – listing all of their late payments to smaller suppliers. Where companies have paid late they will be required to pay interest of eight per cent APR above the Bank of England base rate to the supplier or face fines of up to £10,000.
Mr Perkins said: “Late payment is one of the key challenges facing small business and a series of voluntary initiatives have failed to bring about the culture change required. Our new amendment will lift the onus on small firms to pursue large business customers to pay interest and create a reporting regime that will force late payers to self report and automatically pay interest to their suppliers in the event of late payments.
"The Government’s record on this is lamentable. They U-turned on a commitment to name and shame large companies who pay late, and delayed the implementation of EU directives which would help until the last day possible.”
Interest
Small business currently have the right to claim interest, but just one in ten businesses report even considering taking this option despite 22 per cent of businesses having ended a business relationship with a customer because of continued late payment.
Toby Perkins said: “Unfortunately small businesses are often reluctant to report issues of late payment as they rely on the custom of the large businesses for their very existence. Our amendment crucially shifts this balance so that large businesses will pay on time or face automatic sanctions. My amendment provides Ministers a real opportunity to make a difference on this issue. But if they don’t take action a future Labour Government will.”
The latest figures published by BACs reveal how late payments are a barrier to business survival and growth:
- Britain’s small businesses now carry £39.4 billion in overdue payment they are owed;
- Sixty per cent of Britain’s small businesses report that late payment is a problem with the average small business waiting for £38,186 in overdue payments;
- One in four companies spend over 10 hours a week chasing late payments.
- Over 2,500 firms a year go bust simply because they have not received monies owed to them.
The proposals were welcomeb by IPSE, the Association of Independent Professionals and the Self Employed. Simon McVicker, Director of Policy and External Affairs at IPSE, said: “Late payment is a crippling issue for microbusinesses who rely on being paid on time to keep their business afloat. The proposals from the Shadow Business Minister are a welcome step forward in tackling this problem and we are delighted that our suggestion for 30-day payment terms and mandatory interest has been taken forward.
“However, late payment is a Catch-22 situation for the self-employed– they rely on being paid on time but they also heavily rely on word of mouth to receive work, meaning they can’t chase a payment because it may jeopardise future contracts. To avoid this, our manifesto recommends the creation of a small business conciliation service to resolve disputes which would protect reputations and avoid the need for court action in the first instance.”
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Susie Hughes © Shout99 2014
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