Prime Minister David Cameron has announced details of a consultation that is designed to ensure that small businesses up and down the country are paid on time.
The move comes shortly after a poll, conducted by YouGov, revealed that 85 per cent of small firms – some of which are heavily reliant on card payments – had experienced late payment over the last two years.
The figures confirmed the widely-held perspective that current government-backed measures are failing to achieve their intended purpose.
Mr Cameron is, in fact, firm in his view that the situation needs to be addressed as a matter of urgency, not least because it is crucial to the help of the broader economy.
“I am clear that more needs to be done,” he said.
“It’s not right that suppliers are not getting paid on time for the work they do and the services they provide and I know that late payment can have devastating effects on our small and medium-sized businesses.”
The Prompt Payment Code was established in 2008 in a bid to help ensure that small suppliers get paid on time. However, its effect has been questionable.
While it had the official support of more than 1,500 firms, it was not enough to stop some of the signatories going well beyond the agreed payment date.
Some have, in fact, managed to stretch payments over a 120-day time frame, even though business-to-business payments should be made within 60 days and public sector bills should be paid within 30 days.
Consequently, it comes as little surprise that news of the consultation has already been welcomed by a number of industry figures, including John Allan, National Chairman of the Federation of Small Businesses, and EEF, the manufacturers’ organisation.
“Being paid late or given extended terms can severely hamper many small firms,” Mr Allan said, “they simply don’t have the same cash flow buffer as large businesses.”