The government has been urged to name and shame the large companies guilty of not paying small businesses on time. Brian Cotter MP, the Liberal Democrat small business spokesperson, has tabled a parliamentary motion calling on the government to take tough action against those companies that continue to flout the law. Despite the introduction of new late payment laws last year, it’s estimated that large businesses still owe small firms a total of £20 billion. Late payment remains one of small business owners’ main concerns and is believed to account for a quarter of all business closures. By law, companies are obliged to disclose their payment records, but an increasing number are refusing to comply. In 2001, 4,100 PLCs published the information but by last year the figure had fallen 66 per cent to 2,706. In tabling the motion, Cotter said: “”When small businesses fold, it damages the economy. But when the cause of closure is late payment by larger companies, this is particularly galling. “Small businesses need prompt payment to continue trading. Despite the introduction of late payment legislation, large firms still owe small businesses a net debt of approximately £20bn. “Until the Government gets tough with late payers, the £20bn will sit in the coffers of large companies instead of driving the continued success of the small business sector. “Those that fail to pay on time should be named and shamed in an annual list, so that small firms can judge their payment record and make an informed decision before entering into business with them.” The proposal of an annual ‘naming and shaming’ of corporate late payers has been supported by Nick Hood, senior London partner at Begbies Traynor, the UK's largest independent corporate recovery firm.
Hood said: “Late invoice payments are frequently responsible for the collapse of small businesses. In fact, the Federation of Small Businesses believes a quarter of business failures are as a consequence of interruptions to cashflow.”