What a week. Late payments mentioned in the Chancellor’s speech. Who would have thought it. Small businesses and the self-employed given the plaudits they deserve for the huge contribution they make to the UK economy. The Payments and Cashflow Review published. And that’s just the start. We now need to put the flesh on the bones.
Late payments and long payment terms are the bane of the small business owner’s life. I won’t restate the issues here. You’ve heard them often enough. Suffice to say they undermine the sustainability of an otherwise viable business and cause sleepless nights that lead to physical and mental ill health.
The Chancellor asked firms working on, and bidding for, big Government contracts to lead by example and pay all their invoices in 55 days on average, reducing to 30 days eventually, or face losing out on the chance to bid for future contracts. If Government leads by example, we should see a change in behaviour and that will, I hope, improve private sector payments too. However, as always, the devil is in the detail.
On the same day this week, the other big event which didn’t get quite so much airtime, was the publication of the Department for Business and Trade’s Payments and Cashflow Review. Part of that review looked at the role of the Office of the Small Business Commissioner. I had hoped the Chancellor might mention us in despatches too, alongside all the small business organisations he mentioned like Make UK, British Chambers of Commerce and the FSB, but you can’t have everything. We are to work differently, and I feel, more effectively with the DBT, while remaining an Arm’s Length Body for the time being.
We are also to get some additional powers to investigate the payments behaviour of poorly paying businesses, but those along with other aspects of how we work, will require primary or secondary legislation and that means they have to reach the top of the legislative agenda which can take a long time.
There will be changes to the Duty to Report scheme too. The detail of that has yet to be worked out. Revising the Prompt Payment Code is also one of the recommendations. It’s a voluntary Code and changes could make it more effective. Again, that will take time. There have been many calls since the Code was launched in 2008, for it to be made compulsory but if that were the case there would be no need for it; firms would simply have to comply. However, the current Code criteria can only ever be met by certain businesses. It won’t work for firms that can’t afford to pay their suppliers until they have been paid by their customers, because those customers might take longer than 30 days to pay, because they too are waiting to be paid. All of this has to be worked through and again the devil will be in the detail.
Despite limitations on what we can do now and will be able to do in the future, it’s exciting to feel that speeding up payments to small businesses is on the Chancellor’s agenda and that we can start working on the Review’s recommendations. There is a huge desire to improve payment practices, in Government, in the Department where officials have been working very hard on this and are constantly having to balance the wishes of all different interested bodies, from ministers, and on the part of businesses of all sizes. If big Government contracts go to firms that pay well, we achieve a more effective data reporting scheme for the biggest private businesses, and manage to create a more effective Code with signatories that really can commit to paying quicker, that’s a great start. I’m optimistic and looking forward to getting on with getting on.