What is the Government Doing About Late Payments to Businesses? This Causes 50,000 businesses a Year to Fail. Our Commercial Debt Recovery Solicitors Report
Our commercial debt recovery solicitors have written many articles about the massive problem that late payment of invoices causes to companies, especially SMEs, in the UK. Very often it is large companies indulging in what is known as ‘supply-chain’ bullying when it comes to paying its smaller suppliers that is the root of the problem. It is estimated that 50,000 small businesses close down each year as a result of late payments.
When the Chancellor announced in his Spring 2019 Statement that “We need to tackle the scourge of late payments,” it was welcome news. But what did he propose and, more importantly, how long will it take to introduce the necessary legislation? Our Commercial Debt Recovery Solicitors comment.
Weighed down by late payments? Talk to us.
Why Has the Government Decided to Act Now?
As Andrew McRae, the Scotland Policy Chair for the FSB has said, when referring to supply-chain bullying:
“For far too long, government has tolerated big businesses treating their smaller suppliers with disrespect. Our patience has grown thin and we want to see decision-makers pull every lever available to eradicate this corrosive practice.”
Some of the key data that the FSB’s research has revealed shows that:
- 84% of smaller UK businesses in supply chains say they have been paid late
- 33% say that more than a quarter of payments they received arrive later than agreed
Against this background, and amidst on-going pressure from the FSB and other organisations, it is clear why the Chancellor made his statement in March. As Mike Cherry, the National Chairman of the FSB said recently:
“Nobody should want to see small business owners turning to personal credit cards or overdrafts because of late payments, or even worse for a business to go under as a result of not getting paid.”
What Has the Government Announced to Combat Late Payment due to Supply Chain Bullying?
In his Spring Statement in March 2019, the Chancellor made an important announcement about late payment, which perhaps hasn’t been that widely reported amidst all the noise surrounding Brexit. He stated that big companies should appoint a non-executive director who would be responsible for reducing late payments to smaller suppliers. They must also publish payment practices in their annual reports. He also stated that Greg Clark, the Business Secretary would explore further options.
This was a very positive statement, which whilst not law yet, represents good news for those firms suffering from late payments, and a step up from existing legislation which forced larger companies to publish their raw payment data twice a year on a website. The Government had also set up a complaints’ procedure, which it is thought has been largely ineffective as few SMEs appear to want to make a claim against their big clients for fear of losing the business.
The key issue, of course, is how quickly the Government can pass the legislation, whereupon we must wait to see how well it works. However, to give the last word to the FSB’s Mike Cherry:
“For too long, small businesses have struggled with poor payment practice. Everyone deserves to be paid on time.”
Contact our Commercial Debt Recovery Solicitors to Collect Your Business’s Late Payments
As the UK’s longest established specialist firm of debt recovery solicitors, we have the experience and expertise to recover your late and/or non-payment debts, quickly and efficiently. Since our foundation 40 years ago, we have collected £10’s of millions in late payments for our clients. Click here to see some of our testimonials.
If your business has a late payments problem, the quicker you take action the faster we can act to solve your problem. Contact us or call us on 01922 700730 to instruct us.