Studies show split over government plans to target late payers

Government plans to introduce statutory interest on late payment continue to divide small businesses, according to two reports published last week.

Barbara Roche, small firms minister, will take comfort from a quarterly survey conducted by NatWest, which revealed a marginal vote in favour of the measure.

But she will be less pleased by an in-depth study by Kingston University, backed by chartered accountants Horwath Clark Whitehill, which reports that late payment of business invoices is not as serious an issue as some lobby groups have been claiming it to be.

Responses to the study confirmed the government’s view that late payment poses a severe problem to small businesses. It forces them to rely on costly overdrafts and other sources of short-term finance, with little hope of imposing sanctions on larger customers determined to pay late.

But few companies agreed that statutory powers would solve the problem.

Instead, they thought large customers would attempt to enforce longer contract payment times.

Robert Blackburn, of the university’s Small Business Research Centre, said respondents were more concerned to see a voluntary change in payment culture, especially from government departments.

‘There was a perceived need to change the culture of payment practices – of which government legislation could only be a minor part,’ he said.

The NatWest survey also revealed a decline in the number of small businesses that place late payment high up on their list of problems. It found that 45% of small businesses said late payment was a serious problem, a figure 5% lower than last year.

Peter Ibbetson, the bank’s head of small business services, said legislation was needed to defeat the late payment culture.