This is the call from the Federation of Small Businesses (FSB), which has found that existing policy interventions have had no discernible effect on tackling problems around the UK’s poor payment culture in the last 5 years. Small businesses report that, on average, 30 per cent of payments are typically late compared with 28 per cent in 2011.
The FSB proposal would make boards of larger companies properly accountable for their payment practices, toughen the Prompt Payment Code and task the Small Business Commissioner with tackling supply chain bullying.
Earlier in the year new research from fintech start-up Ormsby Street, also found that UK freelancers are increasingly struggling with late invoice payments, with around half admitting they have considered quitting life as a freelancer because of worries over continued late payment, and 46% stressing about having enough cash to live on. They revealed that one in 10 freelancers have faced difficulties paying their mortgage or rent because of late invoice payment, and many have turned to family (37%) or payday loans companies (36%) to cover a shortfall brought about by late payment..
Mike Cherry, National Chairman at the Federation of Small Businesses, said:
“Uniquely, the UK now risks having a business culture where it is acceptable not to pay SMEs on time. Based on an imbalance of power between large companies and their small suppliers, this now has a chilling effect right across the economy. It’s distressing to hear from our members that in 2016 the average value of each late payment now stands at £6,142.
“Small businesses have to run a tight ship with their cash flow, and as they struggle with increasing business costs on one hand and an uncertain domestic economy on the other. They should not also have to struggle with the stress, time and money required to chase overdue payments from corporate giants.”
“This new evidence demonstrates why it’s so important, from both an ethical and an economic point of view, to address this issue head on. Payment culture is set at board level and supplier interest must be represented at the top of the chain. It’s something that CEOs and board members in big businesses must take responsibility for. Big businesses should respect the supply chain and stop using smaller businesses as a credit line by delaying payments and applying bullying tactics.”
The UK’s Small Business Czar, where are you now?