Late payment culture’s end “could finally be in sight” as yesterday’s Spring Statement laid out policies that would tackle the issue perpetuated by larger businesses.
Philip Hammond spoke to Parliament yesterday (13 March) amid a flurry of Brexit mania to give his springtime economic update. Top line takeaways included a forecast UK growth of 1.2% for 2019, as well as the existence of a potential £26.6bn that could be freed up for government spending if it is not required to smooth over the turbulence of a no-deal Brexit.
A highlight for the print sector and SMEs in general, though, was the Chancellor of the Exchequer’s proposals for tackling late payment culture, which in his speech comprised a suggestion that large companies should appoint a non-executive director to be responsible for reducing late payments to smaller suppliers, and the requirement to publish payment practices in annual reports.
Making his suggestions, Hammond said: “We need to tackle the scourge of late payments.
“As a first step, we will require company audit committees to review payment practices and report on them in company accounts.”
Hammond’s announcement was welcomed by Federation of Small Businesses (FSB) national chairman Mike Cherry, who said that poor payment practices are leading to the closure of 50,000 small firms a year.
“Four out of five small businesses have been paid late, and we told the Chancellor that today was the moment to act, to tackle this scourge once and for all,” he said. “The commitment from the Chancellor that the Business Secretary will see this through is welcome, and we are especially pleased that the first measure has been announced.
“The end of late payments could finally be in sight. It can’t come soon enough, to bolster small businesses at a time when they are in great need of support and a lift in confidence.”
BPIF chief executive Charles Jarrold cautiously welcomed the proposed policies that came amid a statement where Hammond’s “hands were tied in terms of what he could offer business”.
Jarrold said: “Poor payment practices are a problem rife across industries, including print.
“[This policy is] a welcome move, but nowhere near enough to tackle the entrenched culture of late payment. We are still awaiting a full response to the consultation, which is promised shortly – we need to see much tougher measures on the table.”
Late payments are a recurring source of frustration for print SMEs dealing with larger corporate clients, as Launceston-based KCS Print managing director Zoe Deadman found when she attended the BPIF’s South West board meeting this week.
She said: “Printers are being pushed to terms as long as 150-180 days by large customers, who are forcing them to agree before they are allowed to tender. It is good that the government is doing something because it is a problem where those responsible are mostly massive outsourcing companies.
“They need to be brought into line and it makes sense to go after large corporates. Our personal experience is that smaller SME clients struggle to pay, and this is a cashflow issue more than anything.
“It would certainly even things out if larger companies paid to terms – the culture is a vicious circle.”
Nottingham signage specialist Fast Graphics prides itself on a robust system that avoids the pitfalls brought on late-paying clients but managing director Tony Bates hoped that the Chancellor and his government could go further with the policy.
“Recently we had a huge company come to us with a job and we went through the entire rigmarole of preparing the designs and so forth only to be told that their payment policy was 90 days,” he said. “I could not believe the arrogance of that and I am not sure how the Chancellor’s statement hopes to tackle that attitude.
“We are lucky we were able to say no because we are busy enough, but 20 years ago we were not in that kind of position. Asking large companies to publish their full policy would be a good start so businesses know what they are getting into and can refer back to it, helping to name and shame the poor payers.
“I also think the Small Business Commissioner could be given powers to respond to complaints from SMEs, which would in turn bypass the courts system. We need a more simplistic way to enforce these rules and fix the problem, rather than these ineffective sticking plasters.”