Late Payers Consultation to be Launched
Prime Minister David Cameron has announced today that a consultation into the problem of late payments is to be carried out.
The amount of money owed to the UK’s small and medium-sized businesses (SMEs) amounts to a staggering £30.2 billion, according to figures from payments firm Bacs and this is backed up by findings from a YouGov research.
The data from YouGov found that 85% of small businesses had suffered from late payments within the last couple of years.
David Cameron’s announcement comes after a number of years of efforts to try and stem the issue of late payments, including attempts to name & shame late payers and more recently a suggestion by Vince Cable that a levy be imposed on problematic firms that fail to pay on time.
Late payment of invoices has become such a porblem to UK SMEs that some firms have actually turned down business because their clients are so poor at paying their bills on time.
Prompt Payment Code
Previous efforts to curb late payemnt have included the introduciton of the Prompt Payment Code (PPC), a voluntary register of businesses who have promised to pay on time.
The PPC was established in 2008 and is run on behalf of the Department for Business, Innovation & Skills (BIS) by the Instiute of Credit Management.
In 2011 the Forum of Private Business (FPB) identified big businesses as some of the worst offenders and FTSE 100 companies were approached in 2012 to sign up to the code.
Of the 75 FTSE 100 firms contacted, 10 signed up, 5 refused to sign and the other 60 failed to even respond.
In all, around 1,500 firms have signed up to the Prompt Payment Code but despite signing up, some of those signatories have broken the code with some taking as long as 120 days to settle their invoices.
David Cameron said of the continuing problem of late payments:
"It’s not right that suppliers are not getting paid on time for the work they do and the services they provide and I know that late payment can have devastating effects on our small and medium-sized businesses."
The consultation will consist of a number of questions to be asked on the matter of late payment, with the views expressed to shape a future solution to tackling the problem. So far the list contains questions such as:
- How can the board and senior management at firms take greater responsibility for tackling late payment
- What can be done to increase transparency? Name & shame late payers and name & fame the on time payers?
- Is there anythign else that can be done to strengthen the Prompt Payment Code?
- Can exoisting legislation be firmed up and used to tackle late payers?
- Is there a need for additional legislation and penalties such as VInce Cable’s levy?
- How can more companies be encouraged to use existing statutory rights to charge interest on late payments?
- Can SMEs be encouraged to "help themselves" more such as by using electronic invoicing and mobile payments?
David Cameron’s proposals have been backed by the CBI, FPB and manufaturers’ association EEF and the consultaion into late payment will start this year.