John calls on for action on late payments to small businesses

Speaking today (10 January 2018) at the European Parliament’s SME Intergroup (the ‘all party’ groups of MEPs) John Howarth, Labour MEP for South East England, called for increased action to improve payments to small firms.

According to research conducted by the Federation of Small Businesses (FSB); 37% of small firms have run into cash flow difficulties because of late payment, while 61% of small firms are paid late by their big business customers. FSB estimates that 50,000 businesses would remain open and the UK economy would be boosted by £23.5 billion each year if businesses were paid on time.

John Howarth, who was a business owner and director before becoming an MEP, said:

“Late payments are a real limit on the growth potential of small firms. When your cash is tied up servicing cash flow your potential for growth is limited and as you grow that cash flow requirement increases. This limits the growth potential of our economy.

“Late payment legislation, which started at EU level, has made a little difference but nothing like enough. To make it work better we need firm action from governments in member states, including the UK, to compel the public sector to pay small firms on time. That would make a big difference and would create a positive knock on effect. Business organisations need to play their part by creating pressure on larger firms to understand that the corporate bullying of paying small firms late will hurt their reputations. it is naive tho imagine small firms can do this alone, or risk damaging relationships by charging interest on late payments.

“Local Authorities can take a lead and don’t need to wait for central government. They should all implement the 14 day payment standards as the best among them have and councillors should monitor performance to ensure their authority delivers. I am writing to all South East authorities drawing their attention to this.

“At EU level the next logical step would be to outlaw unfair payment terms imposed by larger firms at the expense of their smaller suppliers and implement a single payment standard for the single market. This would still matter to UK firms if and when the UK leaves the EU as we will inevitably have to follow EU standards if we want to continue doing business with the rest of Europe.”