Poor payment practice has been an epidemic plaguing far too many small businesses in the UK, and Leicestershire is sadly no different. Unreasonable payment terms, supply chain bullying and late payments are just some of the ways that some big businesses use their dominant position to squeeze suppliers.
Sadly, many small firms do not survive the crippling impact of this behaviour. An estimated 50,000 businesses are forced to shut down every year due to late payment issues, this at a cost of £2.5 billion to the UK economy.
With many of the Federation of Small Businesses’ (FSB) members in Leicestershire and UK-wide reporting problem day-in and day-out the FSB launched the ‘Fair Pay Fair Play’ campaign in the run-up to the Spring Statement, urging government to take action against late payments with a suite of key reforms. The Chancellor referenced and committed to making these changes during his Statement speech, however since then Brexit uncertainly and attention on the leadership race made it look as if these reforms were going to be forgotten.
This includes FSB’s calls to make company boards accountable for their payment practices; to increase the powers of the Small Business Commissioner; and to strengthen the Prompt Payment Code.
Last week, we were delighted when the Small Business Minister, Kelly Tolhurst announced in Parliament that the Government would be implementing these reforms.
For the first time large businesses could actually be fined for failing to pay smaller suppliers on time as part of the Government adhering to our campaign.
Jenny Cross, FSB Area Leader and Managing Director of Cross Productions said: “This is a fantastic milestone that has been achieved and an important victory for the FSB and small businesses in general. 80% of SMEs in the UK are affected by the issue of late payments made by larger businesses and the public sector. This reform is crucial to the evolution of the business world as it will ease the burden of poor payment practices.”
FSB research amongst its 160,000 members shows that the vast majority (84%) of small firms report being paid late, with half of East Midlands respondents saying at least one in four payments they’re owed arrives later than agreed. Nine out of ten public sector suppliers say that they have been paid late.
The campaign was so successful in making Government implement concrete changes to tackle the late payments due to huge swell of public and small business support for it. The FSB would like to thank its members, supportive MPs and everyone who was involved from acting as media case studies to re-tweeting our messages.
Ending late payments and poor practices is not only the right and fair thing to do, it will also spare small firms the financial impact of waiting for the money they’re owed, and instead allow them to invest and grow.
Of course these reforms are not the silver bullet that will suddenly signal the end of poor payment practices but are certainly important and necessary steps towards this.
FSB will also continue to take direct action by campaigning to local and national government on business issues, working closely with the Small Business Commissioner and including a free debt recovery service with its membership benefits. All 2,000+ FSB members in Northamptonshire have access to this, so make sure you take advantage of it when necessary. Access the service online.