Government efforts to tackle the UK’s late payments culture have failed to achieve the expected changes in practice, with more than a third of SME still reporting major payment delay problems, according to research by Close Brothers which says regulatory action is needed
The Close Brothers Business Barometer, a quarterly survey of SME sentiment on a broad range of issues, found that 34% of all SMEs still see overdue invoices as a problem for their business, while almost a fifth of these firms (17%) warn the issue is seriously affecting their ability to trade.
Almost two-thirds of SMEs (60%) report spending at least a day a month chasing payments that should already have been made.
David Thomson, CEO of Close Brothers invoice finance, said: ‘The UK’s record on late payments is very poor – while other countries have seen late payment rates come down as their economic fortunes have improved, the UK’s business culture seems to be one in which it is acceptable not to pay SMEs on time.’
Thomson said SMEs are awaiting details of the government proposal to set up a small business commissioner, who could be given powers to intervene in disputes between SMEs and larger organisations over payments. However, it remains unclear exactly how the scheme will work and to what extent large businesses will be required to participate, with Thomson pointing out that the prompt payments code, for example, is a voluntary standard.
‘SMEs need better statutory protection and an independent champion prepared to take action on their behalf. Many SMEs feel very uncomfortable challenging larger businesses, on which they may be reliant for substantial amounts of revenue, over late payments; this is where regulatory action is essential,’ Thomson said.
