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18 Sep 2008
The Forum of Private Business (FPB) is urging the government to lead by example in countering the growing problem of late payments.
As the economic downturn continues, late payment is becoming an increasing obstacle to many UK firms, by restricting their cash flow. Now the FPB wants the government to set a precedent by paying its own suppliers on time.
The FPB has written to the Secretary of State for communities and Local Government, Hazel Blears, to emphasis the impact of late payments on small firms.
Further reading
A recent FPB survey revealed that 95 per cent of respondents felt the government should set an example.
Matt Goodman, the FPB’s policy representative, recently met with civil servants at the Department of Business, Enterprise and Regulatory Reform (BERR) to discuss the issue.
He said that, for small businesses struggling in the current economic climate, receiving timely payments can mean the difference between trading profitably or not at all.
"BERR has acknowledged the impact of late payment on small firms, and is working to ensure that the Government takes the lead on the issue. We have also written to ask Ms Blears to see that it is being addressed at a local level," he said.
"Solutions that have been suggested include a public sector code of practice and increased awareness across individual government departments. It was agreed that the way forward must not lead to more regulation, which would simply add to another major problem for small firms.
"What is needed is a change in the culture of payment."
Firms have a statutory right to interest (SRI) under the Late Payment of Commercial Debts (Interest) Act 1998, allowing them to charge interest on the debt they are owed.
However, the FPB is concerned that many don't do so because they fear that these larger businesses will simply refuse to deal with them again.
The FPB – which maintains a ‘hall of shame’ for bigger companies which squeeze their suppliers by imposing unilateral contractual changes and ‘settlement discounts’ on invoices – is encouraging its members to report systematic late payers.
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