Labour promises to tackle late payment

Monday 27 October 2014

The Labour Party has promised that it will tackle late payments as it puts forward what it describes as 'tough' amendments to the Small Business Enterprise and Employment Bill.

Shadow small business minister Toby Perkins put the amendment forward and it went up for debate on October 21st. However, it is rare that opposition amendments pass through Parliament. Some may believe that Labour are attempting to win over voters such as limited companies, sole traders and self employed professionals in time for the general election next year.

Under the amendment, corporations would be forced to file a quarterly report on late payments. Every freelancer noted in these reports as having been left out of pocket would then automatically net interest of eight per cent APR. Through the Bill, this could be enforced including fines of up to £10,000 for failure to pay.

The amendment was put forward after a number of voluntary initiatives failed to appropriately tackle the issue of late payment.

Mr Perkins 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."

He condemned the government for failing to deal with late payment, noting the occasion when it U-turned on a decision to name and shame large companies who did not pay on time. Mr Perkins also pointed out an occasion when the government did not implement EU directives to deal with late payment until the last day possible.

Mr Perkins also referred to the evidence session for the Small Business Bill, where the government's methods of dealing with late payments were criticised by groups such as the Federation of Small Businesses and the Forum of Private Business.

Small businesses at present have the right to claim interest if a customer is late paying them. However only ten per cent of business say they consider this option in spite of the fact that 22 per cent of small firms have terminated a business relationship with a client due to continuous late payment.

Mr Perkins said this reluctance to charge interest is because small businesses often need to work with large businesses to safeguard their existence.

The latest figures from BACs show that small businesses now carry a burden of £39.4 billion in payments that they are owed. Late payment was reported as being a problem for 60 per cent of small businesses, with the average price of overdue payments sitting at £38,186. More than ten hours a week is spent on chasing late payments among 25 per cent of businesses. What's more, 2,500 businesses become insolvent each year because they have not received payments that were owed to them.

By Victoria McDonnell

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