Downturn exacerbating late payment problems

18 September 2008

Late payments are posing more of a threat than ever to small businesses in the current economic climate, the Forum of Private Business (FPB) has argued.

Research carried out in August, the FPB said, revealed that, of those businesses that responded, some 88 per cent reported that they were not being paid on time, with 56 per cent saying that late payment had become worse over the past year and 72 per cent that it was having a ‘serious’ or ‘very serious’ impact on their businesses.

Matt Goodman, the FPB’s policy representative, met with civil servants at the Department of Business, Enterprise and Regulatory Reform (BERR) to discuss the issue.

Mr Goodman said that, for small businesses struggling with the economic slowdown, receiving timely payments can mean the difference between trading profitably or not at all.

He urged the government to show the way in promoting prompt payment.

Mr Goodman commented: “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, the Communities and Local Government minister, to see that it is being addressed at a local level.

“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.”

Although businesses have the legal right to charge interest on late payments, the FPB said that many are reluctant to impose penalties for fear of losing custom from larger companies.