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Labour’s bold plans could end late payment misery for small businesses

The Labour Party have made an audacious sortie in the battle for small business support with a new policy designed to end the years-old practice of late payment of small business invoices.

Labour have challenged the government to back small businesses by proposing a tough new amendment on late payments in the Small Business Enterprise and Employment Bill.

The latest figures published by BACs reveal how late payments are a barrier to business survival and growth:

  • Britain’s small businesses now carry a burden of £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.

TP interview in his officeToby Perkins, Labour’s Shadow Small Business Minister, 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.

The evidence session for the Small Business Bill saw the government’s latest piecemeal attempts widely criticised by organisations such as Federation of Small Businesses and Forum of Private Business.”

The Labour amendment was tabled by Mr Perkins and is due to be debated on 21 October.  It would ensure 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 8% APR above the Bank of England base rate to the supplier or face fines of up to £10,000.

Small business currently have the right to claim interest, but just 10% of businesses report even considering takin this option despite 22% of businesses having ended a business relationship with a customer because of continued late payment.

Toby Perkins explained: “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 issueBut if they don’t take action a future Labour government will.”

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I am Toby Perkins, Labour's Member of Parliament for Chesterfield. If you would like to get in touch with me, my office is open and can be reached by phone on 01246 386 286. I also hold regular surgeries in Chesterfield and Staveley so that constituents can meet me and I can take up their concerns. If you would like to make an appointment then please do contact my office. Thank you for visiting.

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