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Late payment to SMEs is "market abuse" says report

5 December 2018

Late payment to SMEs is "market abuse" says reportLate payment practices continue to adversely affect UK small businesses and self-employed contractors, according to a new report.

Small Business and Productivity, published by the Business, Energy and Industrial Strategy (BEIS) committee, has found that late payment practices are still widespread and that some big firms exploit the imbalance of power with small suppliers to impose unacceptable terms.

The BEIS report said: "SMEs still suffer from late payments, inhibiting their ability to grow, affecting overall UK productivity ... late payments are built into the business models of too many companies, leading to many SMEs losing staff, profits and their businesses. This is totally unacceptable, unfair and constitutes a particularly disgraceful form of market abuse."

The report has made a number of recommendations including:

  • All medium and large companies should be required to sign the Prompt Payment Code, and adopt statutory payments terms of no more than 30 days;
  • The small business commissioner should be given powers to fine persistent late payers.

Jordan Marshall, policy development manager at freelancer body IPSE, said: "Big companies must stop exploiting the self-employed and small businesses by treating them as an additional line of credit. Government and industry should treat this report as a wake-up call. It is totally unacceptable that larger companies are building late payment practices into their business models."

Mike Cherry, national chairman of the Federation of Small Businesses (FSB), said: "Some of the payment practices described here are really shocking. A big business waiting 800 days to pay a supplier is nothing short of disgraceful. The committee has exposed a late payment hall of shame. Many of these businesses are household names.

"It's now up to the Government … to come up with solutions that definitively end a UK late payment crisis which destroys 50,000 small firms a year, stifles economic growth and hampers productivity."

Commenting on the report, the CBI said that improving payment practices is good for the overall economy. "Strong, collaborative supply chains are vital - when big, medium-sized and smaller businesses work together, the economy prospers," said Josh Hardie, CBI deputy director-general.

"Firms have already done a significant amount to improve … but with too many small and medium-sized firms still disproportionately affected by late payment, it's right that policy-makers are looking to drive down unfair and dishonest practices where they still exist.

"For companies themselves, prompt payment is core to their reputations as well as their sustainable growth. Tackling this issue must be a board level conversation and all businesses must take accountability for their own practices seriously."

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