11 February 2014 | Will Green
More than half of small businesses were paid after the agreed payment date by large firms in 2013, according to a survey.
The Federation of Small Businesses (FSB) polled more than 8,000 of its members and found 51 per cent of those providing goods or services to larger private sector companies were paid late.
The research revealed late payments meant reduced profitability for 34 per cent of respondents and restricted business growth for 29 per cent, while 32 per cent had paid their own suppliers late.
The FSB said fear of losing contracts was also an issue, with only 12 per cent of firms charging interest for overdue payments for fear of losing business.
The organisation is calling on the government to beef up the Prompt Payment Code, including getting signatories to state their maximum and average payment terms and making it easier for firms to make complaints.
John Allan, national chairman of the FSB, said: "As the economy gets stronger we must do everything we can to help businesses and late payment is an issue the government and large businesses must tackle. Small businesses simply can't be expected to lend interest free to their large customers, which is in effect what extended payment terms and late payments results in. This is as much a policy issue as it is a cultural problem within UK business.
"Small firms need confidence to charge interest and complain about late payments. The fear among the smallest firms is that complaining about late payment should result in lost future work which will harm cash-flow for their business.”
A seminar covering late payment and a new EU directive to tackle it, organised by the European Commission Directorate General for Enterprise and Industry, takes place in London on Thursday.