The UK’s Federation of Small Businesses is calling on the Chancellor to use this week’s Spring Statement to vow to crack down on the practice of late payments – something that drives thousands of small companies out of business every year and costs the economy billons.
New research from the trade body shows that 84 per cent of small businesses say that they have been paid late for a product or service, and a third say that at least one in four payments they’re owed arrives later than initially agreed.
A total of 37 per cent say that agreed payment terms have lengthened in the past two years – something that’s hampered their cash flow— and only a tiny 4 per cent say that payment terms are improving.
“Small firms will applaud healthy public finances off the back of responsible management. However, what they need to see day to day is large corporations taking a similarly responsible approach to paying suppliers,” said FSB national chairman Mike Cherry. “Small firms currently have billions withheld from them by large companies that pay late.”
Mr Cherry said that the UK’s “late payment crisis” causes the closure of an estimated 50,000 businesses every year, which translates into a cost for the economy of £2.5bn annually.
“The collapse of Carillion saw the dangers of poor payment practice writ large. The sorry episode has cost jobs and ruined lives,” the chairman said.
He said that by speaking out on the practice of late payment in Tuesday’s Spring Statement, Chancellor Philip Hammond will “send a clear message to British boardrooms” and encourage those in charge of the UK’s biggest corporations to collective address what has become a pressing issue.
Small businesses constitute the bedrock of the UK’s economy. They account for over 99 per cent of all private sector UK companies. Total employment across small and medium-sized UK businesses was 16.1 million last year, representing 60 per cent of all private sector employment.
According to the FSB, the combined annual turnover of SMEs is around £1.9 trillion – or around 51 per cent of all private sector turnover in the UK.
The FSB’s survey of small businesses and their experience with late payment is based on a survey of over 1,500 companies, conducted between 19 February and 5 March.