Labour plans to tackle late payments culture

11th April 2017

Plans by the Labour leader, Jeremy Corbyn, to tackle poor payment practices by big companies against their small suppliers have been welcomed by the Federation of Small Businesses (FSB). In a speech to FSB members today, Mr Corbyn’s proposals included excluding late-paying large firms from public contracts, and to force big businesses being paid by taxpayers to pass on prompt payment requirements down the supply chain.

The Government this month introduced a requirement for large companies to declare what percentage of their payments to smaller suppliers are settled within an acceptable 30 days; and what proportion go unpaid for an unacceptable 60 days or more.

FSB National Chairman, Mike Cherry, said “Small firms are facing a late payments crisis. We know from our research that around 50,000 small firms a year go bust as a result of unfair and lengthy delays in big business customers paying what they owe. Others often have to take out loans to cover the gap. These poor practices and wider supply-chain bullying have to stop.

“Jeremy Corbyn’s proposals today are important, as we build a cross-party consensus for further action.  Government’s transparency reforms are vital, but not sufficient.  We believe it must set an example, with prompt payment practice disseminated throughout the supply chain of the £230bn public procurement programme. Larger firms should be helping their smaller counterparts, not paying them late. To eradicate this will require culture change across the economy which must be championed from the very top. That is why we believe the best solution is to make a Non-Executive Director on the Board of all large businesses accountable for the firm’s treatment of its smaller suppliers.

Mike Cherry also welcomed Jeremy Corbyn’s pledge to exempt smaller firms from Government plans to replace annual tax returns with quarterly ones: “FSB research shows the potential burden these reforms will have on those least able to deal with it, with time and support costing more than £2,000 for an average small business.  We agree there is a strong case to exempt firms below the VAT threshold of £83,000, as those above are already making quarterly returns and so are better able to cope. The Government’s one-year delay for these businesses should be made permanent.”