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Enterprise Bill to ease late payment concerns for SMEs

Small businesses whose cash flow is hampered by clients that fail to pay on time will be offered free mediation services to settle the late payment dispute as part of new legislation announced within the Enterprise Bill this week.

The policy, published on Thursday by the Government, sets out a clear strategy for assisting the growth of UK SMEs.

Business Minister, Sajid Javid promised earlier this year that the bill would reduce the cost of red tape by £10bn and Mr Javid has followed through with that promise by planning to axe regulation and clamping down on independent regulators which create extra, unnecessary bureaucracy.

However, one of the latest developments from the bill included plans to use the small business commissioner to champion a single cause – primarily late payments.

Small Business Minister, Anna Soubry, said: “One of the things the small business commissioner will do is signpost people to the mediation services available when neither side wants to go to court over late payments.

“Small businesses can contact the commissioner when they have a complaint and he or she will investigate.”

According to Bacs statistics, as quoted by the Government, small firms are owed up to £26.8bn in late payments from clients, but additional data from accountancy firm Sage suggests the true figure could be as much as £55bn.

Ms Soubry reiterated that the Government would steer clear of any “name and shame” approach to the late payment problem, in a bid to avoid damaging customer relations for small firms.

“The commissioner will speak to the chief executives and it will be sorted out over the phone,” added Soubry.

“The last thing I want is to name and shame a larger business and give out details of complaints but if people aren’t playing ball, that power will be available [to the commissioner].”

The late payment issue will also be extended to the insurance industry, with insurers implored to pay out claims to SMEs within a reasonable time period.

The bill also includes an update to the existing Industrial Development Act, supporting the roll-out of telecoms and broadband services across the UK.

The Federation of Small Businesses (FSB) welcomes the new Enterprise Bill but warns the Government should also be looking closely at the threat of high business rates to ambitious small firms.

John Allan, national chairman, FSB, said: “The FSB welcomes the introduction of the Enterprise Bill and the continued focus on boosting enterprise.

“To make an impact, the bill should focus on a number of ongoing challenges facing businesses and ensure economic growth is supported.

"Those areas include reform of business rates, tackling the UK’s poor payment culture which sees too many of our members being paid beyond terms, lightening the burden of regulation and improving broadband connectivity.

“The initial measures in the bill look to tackle these areas and are therefore promising, and we look forward to working with the Government to see their successful implementation."

Image: British High Commission, New Delhi

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