More than 440,000 small businesses could be put out of business by the late payment crisis, according to the Federation of Small Businesses, which has called for urgent government intervention to improve corporate pay.
Almost a third of small businesses surveyed (30%) told the FSB that over the past three months there had been an increase in bill late payments, and at least 8% warned that the problem had gotten so bad that it would affect the viability of their business.
The problem of late payments has preoccupied the small business sector – often from large FTSE firms – for years. Organizations are often forced to pay their suppliers, wages, and other bills on time, but have to wait a long time to be paid themselves.
The FSB said that since the pandemic began, more than 400,000 small businesses have closed for various reasons and that the future of a similar number is now threatened by this problem alone.
“The late payment destroyed thousands of small businesses even before the pandemic broke out – the pandemic made matters worse,” said FSB national chairman Mike Cherry. “In the past, the government rightly identified increased board accountability as key to promoting change in this area, but implementation has been slow.”
Cherry said small businesses employing more than 13 million workers in the UK are facing battles on almost all fronts, including new customs controls on imports from the EU and an impending energy cost crisis.
“Today there is a new wave of administration for importers and exporters – in three months there will be an increase in wage tax, i.e. social security contributions, an increase in dividend taxation, trade tax bills and an increase in the national” subsistence level. In addition, operating costs are rising – many will soon seek energy deals without the interference of large companies or consumer protection. “
The FSB has said that every large company and government organization should adhere to the code for quick payments, arguing that 30-day payment deadlines “should be the norm for those who are environmental, social and governance best Use Practices “.
It wants every major UK company to have a non-executive director on the board who is directly responsible for the payments culture.
The ministers will be concerned with the further results of the FSB survey of more than 1,200 members. More small businesses now expect their performance to deteriorate over the next three months as an improvement. Pessimism is particularly pronounced in the retail, accommodation and food industries, as many UK consumers have imposed bans on Omicron.
Pictures of deserted main streets in the run-up to Christmas, fears about rising energy costs and concerns that employees will not be able to return to work on Tuesday did not help. Rising energy costs have already forced some companies to close. Companies are not protected by the price cap imposed by the regulator Ofgem.
Companies that import goods from the EU are now also faced with new, annoying paperwork. Regulations require companies (in most cases those who receive goods in the UK, but in some cases also those who send them to the UK) to tell Customs what exactly is being shipped from the EU to the UK and from where. The rules were repealed in 2021 but are now in effect for the first time.
A government spokesman said, “The government is making significant reforms to help small businesses get paid on time, including halving the payment deadline in the instant payments code and advising on fines and other new powers for the small business commissioner.”
“There is a lot of support to ensure that small businesses are well positioned to comply with UK border processes, including individual advice from the Export Support Service.”