Westminster Parliament, House of Commons

The government has voted down Labour’s proposed amendment to the Small Business Enterprise and Employment Bill that the opposition said could have ended “late payment misery” for small businesses.

Tony Perkins, Labour’s shadow small business minister, argued the amendment he tabled would have lifted the onus on small firms to pursue large business customers to pay interest.

It would have ensured the largest companies in Britain completed a quarterly report – in the same manner as a VAT return – listing all of their late payments to smaller suppliers. 

Where companies had paid late they would be required to pay interest of 8% APR above the Bank of England base rate to the supplier or face fines of up to £10,000, he said.

The latest figures published by Bacs indicate £39.4bn is overdue to small businesses and that 60% of Britain’s small enterprises report that late payment is a problem with the average small business waiting for £38,186.

Perkins said: “Late payment is one of the key challenges facing small business and a series of voluntary initiatives have failed to bring about the culture change required.

“Unfortunately small businesses are often reluctant to report issues of late payment as they rely on the custom of the large businesses for their very existence.” 

He said the amendment crucially shifted this balance so that large businesses would pay on time or face automatic sanctions.

A spokesman for Perkins said after the debate yesterday that Labour would bring in the amendment if it won next year’s General Election.

John Allan, national chairman of the Federation of Small Businesses (FSB), said late payment was crippling many firms.

“It is vital that all political parties engage in this issue and the Labour Party has put forward some interesting ideas which we will need to examine in detail before we know how they will work in practice.

“The FSB wants to see the prompt payment code have real powers to enforce compliance by it signatories. We also think government and local government should use their own procumbent clout to make sure their suppliers pass on good prompt payment terms all the way down the supply chain,” he said.