Figures from the Federation of Small Businesses show that 50,000 business close every year due to late payments.
Citing the research, Small Business Minister, Kevin Hollinrake, made renewed calls for small businesses to be paid promptly. “For too many businesses, access to finance is difficult. Lots of businesses don’t want to borrow because of a trust relationship between business and banks at times,” said Hollinrake. “Late payments are seen as a finance problem. It creates a need with a business to go out and get finance, just to cover the debt.”
However, Hollinrake’s Shadow Small Business Minister, Seema Malhotra, pointed out that not a single company had been fined for a failure to comply with their duty to report on payment policies and practices.
In her own speech, Small Business Commissioner Liz Barclay said: “We’ve got to get the language right. I don’t want my 5.6m small businesses paid promptly, I want them paid much quicker, because if they’re paid promptly on 120 days, they’ve gone bust. We have a big, big problem with extended payment terms.”
She challenged the audience to think about the possibility of paying UK small businesses one week faster on average. “I think that £10bn more would be sitting in the province of small businesses. What would you do if you got paid faster? I think you’d invest, I think you’d have the certainty. If you have the certainty, you’d invest in equipment, you’d invest in training, you’d invest in upskilling, those people who are really valuable to you.”
The Government recently launched the Prompt Payment and Cash Flow Review to look at issues including the powers granted to the Small Business Commissioner.
Hollinrake appeared at an event hosted by Jane Hunt MP and TSB at Portcullis House, Westminster, called Pay Small Businesses Promptly!
Alongside Hollinrake were Small Business Commissioner, Liz Barclay; Small Business Britain founder, Michelle Ovens; and Shadow Business Minister, Seema Malhotra.
The release of the report, How to Grow, from Small Business Britain, highlights how small businesses can grow in a recession.