SMALL businesses in Yorkshire are going bust because of “corporate bullies” who don’t pay their bills on time, according to the regional chairman of the Federation of Small Businesses (FSB).
Gordon Millward made his comments after research revealed that Britain’s small and medium-sized businesses (SMEs) were owed more than £35bn in outstanding debts in December last year, which is £2bn higher than the figure reported six months earlier.
Across the UK, 785,000 SMEs were experiencing problems in December with late payments, including 168,000 in the north of England, according to research carried out by Bacs Payment Schemes (Bacs).
Although the number of SMEs experiencing late payments in December was smaller than it had been six months earlier – the figure was 861,000 in early July 2011 – their combined debt was bigger than ever.
In late December, the average SME in the north of England was owed £30,000, which was less than the UK average of £45,000.
The Bacs research indicated that many big businesses are not paying on time. Forty one per cent of SMEs said big firms were the “worst offenders” when compared with private companies, individuals, other SMEs and Government departments.
Mr Millward said yesterday: “Small firms do not have the same cash-flow buffers as larger businesses. Being paid late causes major disruption and is a primary cause of business bankruptcies.
“The Government’s commitment to pay all invoices to small firms within 10 days has improved things considerably, but it is now the larger public sector organisations which are the chief culprits.
“There is little doubt that a number of large household-name corporate organisations are using high-handed tactics to impose extended payment times on their smaller suppliers.
“These policies are being imposed unilaterally as a means of improving larger companies’ liquidity and cashflow situations. This form of corporate bullying is causing business closures and job losses in the small business sector, and are abhorrent and unacceptable.
“The FSB is calling on the Government to ensure that all public agencies follow the lead of central Government and pay all invoices to small firms within 10 days. All contractors used by the public sector should pay their sub-contractors within the same time and all private sector companies used by the public sector should sign up to the Prompt Payment Code.
“Our research shows that the time wasted by owners of small businesses in chasing late payments ranges between one and six hours per week. We are advising small firms to take control by making sure there is a contract in place which confirms payment times and then stipulates penalties – such as interest charges – if payment is late.”
Mike Hutchinson, a Bacs spokesman said: “Our research highlights the challenges faced by many thousands of SMEs in chasing payments from customers and maintaining a healthy cash flow which is the life blood of any successful business.”
Kenton Robbins, the regional director of the IoD, said that late payments stretched all businesses in challenging times.
He added: “The stress that comes from lack of cash then leads to businesses making poor decisions because they are financially constrained.”
A Department for Business, Innovation and Skills spokesman said that legislation alone was not enough to enforce prompt payment of suppliers. The spokesman added: “We need practical, business-focused solutions to help SMEs and make sure they are paid promptly. There are now more than 1,000 businesses signed up to the ICM’s Prompt Payment Code and the Government supports this industry-led approach in which suppliers, including SMEs, are in a position to support membership applications and report any failings.
“One of the most important steps is for businesses to formally agree terms of payments before transactions and stick to these terms.
“Simple practical measures can help SMEs make great strides in securing the cashflow that will help them thrive.”
A CBI spokesman said there was nobody available to comment from its policy staff yesterday.