Late payment protection for SMEs: Labour's campaign pledge

24 March 2015

A Labour government would introduce new laws to protect smaller businesses (SMEs) from the “scandal” of late payments, Ed Miliband has said.

The leader of the opposition told the Federation of Small Businesses (FSB) that it was a “national scandal” that 44 per cent of small and medium-sized businesses suffered from late payments last year, according to government figures. The average business was owed over £30,000, Miliband said.

Describing how late payments hamper SMEs' ability to invest and grow and threaten insolvency, he said too many small firms were unable to enforce rights to charge interest on late payments.

A Labour government would require large firms to report on their record of late payment and list how they had compensated suppliers affected by it.

Miliband also attacked charges from large firms for suppliers to keep business with them.

In January SM reported that around five per cent of small firms were forced to make a payment or face being delisted from customers’ supplier lists, according to FSB figures. Miliband said Labour would consider legislation to end this practice: “This is wrong… you should be paid for the product you produce, not face what the FSB have called ‘supply chain bullying’,” he said.

The Labour leader said his party planned to establish a Small Business Administration, with the power to ensure regulations are designed with small firms in mind.

He singled out energy bills as a challenge facing small businesses, saying while wholesale prices had fallen 20 per cent, bills had fallen by only a fraction of that. He reiterated Labour’s pledge to freeze energy bills until 2017, give a new regulator the power to cut bills and to legislate to give small businesses equal protection to households in the energy market.

Meanwhile, the Forum of Private Business (FPB) has said the growth of UK SMEs is being undermined by spiralling costs of doing business, suffocating red tape and bullying tactics from big companies.

The poll of more than 4,000 UK small and medium-sized businesses showed the extent of damage felt with nearly half stating that their business partners are neither interested in fostering a long term relationships (47 per cent) nor open to negotiating payment terms (46 per cent). A majority (70 per cent) said behavioural late payment had been a problem in the past 12 months.

More than half (52 per cent) said that in the face of supply chain abuse from big businesses, they would be forced to broaden their client base to minimise any future disruption to their cash flow.

In response, the FPB has launched its Business Ethics Pledge, which calls on big business to commit to a five-point plan to protect and promote small British businesses ahead of the General Election.

CEO Phil Orford said: “Our latest poll confirms the supply chain is fit to burst with hurdles and roadblocks that discriminate against small firms. Big business has all the aces, and it is time for affirmative action from the next government to crack down further on this ethical deficit that threatens to break the backbone of British business – small businesses.

“We welcome last week’s Budget announcement to use taxation as a way to influence better business practice in the UK.

"The UK’s political parties should be judged at the election on their commitment to put business ethics at the top of the political agenda.”

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