Late payment law 'is a failure'

Late payment legislation brought in almost a decade ago to help firms claw back monies owed with interest has failed, a credit expert has declared.

Speaking to The Financial Times, Martin Williams, managing director of Graydon, said small companies are no better off than they were when late payment laws took effect in 1998.

He told the paper: “It hasn’t got any better in the last 10 years – if anything it’s got worse.”

The problem referred to hurts the micro companies the most, as sole traders or incorporated firms need payment for services to be on time, so they can avoid cash flow problems.

But according to a poll by Graydon of 600 small to mid-sized firms, more than half have never used the legislation, which allows them to claim interest on commercial debts.

About a fifth said using the law would upset a client or lose them altogether, while a quarter felt it would create more administrative work.

The most popular response of ‘it’s not our company policy’ beat off a significant number saying late payment legislation, which applies UK-wide, is ‘not customary in our industry.’

The results of the survey are timely: a small business lobbyist yesterday identified the “priority issues” for the government, and put late payment at the top of the agenda.

Miles Templeman, director-general of the Institute of Directors, believes the core issue of late payment illustrates the “gaps” in the government’s policy approach to small and medium-sized enterprises.

He said: “Late payment was highlighted as the factor causing the most significant negative impact on smaller companies, yet government have withdrawn support and reduced funding on the very initiatives aimed at tackling this growing problem.”

More concern about tardy payers, typically large companies, has come from The Forum of Private Business: three quarters of firms it polled said late payment was a “considerable threat to my business’s viability.”

Despite the legislation to tackle late payment, a league table ‘naming and shaming’ late payers, and plain English explanations as to how to use the legislation, Britain remains notorious for late payment.

In another league table compiled earlier this year by credit management firm Intrum Justitia, Britain reportedly ranks as one of the worst countries in Europe for delays in commercial fees.

It takes an average of more than 40 days for a small company to get paid in the UK compared with just 22 days in Norway, says the table, which ranks Britain 18th out of 22 nations.

Excuses given for not paying on time include a firm insisting that their accountant’s false teeth had fallen out his mouth, and then of the window, while he was writing the cheque, so he had to make for the nearest dentist.

If late payment is an issue facing your business that you think the government should tackle, then you can get in touch with Mark Prisk, shadow small business minister.

The Tory MP suspects the government is wasting the £2.6bn it spends every year on small and mid-sized firms, and says the self-employed should have a say how it should be spent.

To air your views to the minister, about late payment or another issue facing your small-business, contact him through the ‘free enterprise’ tab on his website.


14th August 2007

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