Coronavirus: FSB urges government action on £23bn late payment crisis

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The Federation of Small Businesses (FSB) called on policymakers and big corporations to bring a £23bn ($28.4bn) late payment crisis to an end as businesses try to cope with the economic fallout of the coronavirus pandemic.

In November 2019, Pay.UK said the UK SME late payment debt had risen to £23.4bn that year, up from £13bn owed in 2018.

With the coronavirus pandemic, the situation seems to be worsening. A new study by the FSB of more than 4,000 firms shows that the majority of small businesses (62%) have been subject to late or frozen payments in the wake of the COVID-19 outbreak and that only one in ten (10%) small businesses have agreed changes to payment terms with clients.

Around two thirds (65%) of small businesses that supply to other businesses have suffered late or frozen payments and around 63% of those in public sector supply chains have experienced the same treatment.

Small firms in the wholesale (71%), legal and accounting (62%) and advertising and marketing sectors (62%) have been hardest hit in this regard.

The FSB also stated that despite efforts by government to improve procurement practices, there is no discernible difference in late payment activity between public and private sector supply chains.

FSB national chairman Mike Cherry said: “Worryingly, this behaviour isn’t just confined to the private sector: late payment is equally prevalent within government supply chains.”

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The organisation has urged the government to take several measures. For one, it wants policymakers to make any big corporation that receives government support for COVID-19 sign a supplier charter committing it to payment of small firms within 30 days.

It also believes the small business commissioner should be given more powers to investigate and fine repeat late payment offenders.

The FSB also wants the creation of a centralised relief pot for small firms within government supply chains that have seen payments frozen.

Cherry said: “Sadly, some unscrupulous corporations are trying to inoculate themselves from the impacts of COVID-19 by withholding payments, or even freezing them, at the expense of small businesses.

“Cash is still very much king for small firms, and withholding it has pushed many to the brink at a time when they’re at their most vulnerable. The government promised to act a year ago. Time is running out – we need to see delivery.”

The government had originally put forward a raft of late payment reforms in June 2019.

Speaking in the Lords on behalf of the government last week, Baroness Bloomfield said: “I accept that publishing reform proposals is taking longer than originally hoped… as soon as we can we will address this issue at pace.”