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Almost Two-Thirds Of Small Businesses Left Without Payment During Pandemic

Posted 4 months ago

Almost Two-Thirds Of Small Businesses Left Without Payment During Pandemic
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Just under two-thirds of small businesses have suffered from late payments during the pandemic, according to a report commissioned by the Federation of Small Businesses

The report highlighted how most of the 4,000 businesses surveyed had been affected, worsening the crisis of late payments is equally as damaging in public and private sector supply chains. 

The latest Pay.UK data show that the sum of late payments due across the country rose 80% to £23.4bn at the end of last year.

The Federation called for a "long-awaited" review of the Prompt Payment Code to be launched, repeat offenders fined and prompt payment to be made a precondition of state bailouts.

The report shows only one in ten small businesses have agreed changes to payment terms with clients, meaning the vast majority of this fresh wave of poor practice has not been formally signed-off.

The study shows that, despite concerted efforts by government at all levels to improve procurement practices, there is no discernible difference in late payment activity between public and private sector supply chains.

FSB chairman Mike Cherry said: "Before the Covid-19 outbreak struck, many small firms were already under immense financial pressure because of late payments.

"With cashflow drying up as the lockdown took hold, this situation has worsened. 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.

"Our endemic culture of treating small businesses as free credit lines against their will must be brought to an end.

"Worryingly, this behaviour isn't just confined to the private sector. Late payment is equally prevalent within government supply chains.

"If the small firms that make up 99% of our business community are to play the fundamental role we need them to in ending this recession, this behaviour must stop. The Government promised to act a year ago. Time is running out - we need to see delivery."

Commenting on the report, CEO of NextFin Sacha Bright, said: “I agree with the FSB that a condition of any government help must be that firms adhere to payment terms.

"It cannot be just B2B companies, however. The rules must apply to industries such as airlines, for example, who are receiving huge government bailouts but are withholding refunds.”

Authors: Oliver Murphy & Sacha Bright

Disclaimer

To the best of our knowledge, the information we have provided is correct at the time of publishing. Sacha Bright is not a solicitor or accountant and we recommend that you seek professional advice on any topic discussed.

Tagged: sme coronavirus entrepreneur news



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