Small Businesses: Invoice Payments

Lord Harrison Excerpts

Tuesday 26th October 2010 Lords Chamber

Asked By

[Lord Harrison]

To ask Her Majesty’s Government what steps they are taking to promote prompt payment of invoices to small businesses by public sector organisations and within the private sector.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, the Government are working in partnership with business and finance bodies to challenge the long-standing culture of late payment. Our strategy encompasses three key aims: equipping suppliers with the support and guidance they need to better manage their customer relationships, invoicing arrangements and cash-flow management; establishing the public sector as a payment exemplar; and identifying and promoting private sector exemplars.

[Lord Harrison]

My Lords, given that one in three small firms has to wait 40 days beyond the agreed payment periods to receive an average £38,000 in late payment from Government, public bodies and larger firms, will the noble Baroness study some of the solutions offered by the Federation of Small Businesses? These include having a social clause, which would oblige contractors to pay subcontractors as swiftly as they are themselves paid by Government. She knows very well that small firms worry about obliging larger firms to comply with the late payment Act because they think they will not get future contracts. Secondly, will the Minister enforce the Companies Act 1985 and ensure that Companies House has the wherewithal to name, shame and fine the regular violators of late payment law, which so frustrate our small businesses at a time of financial downturn?

[Baroness Wilcox]

I thank the noble Lord for the question and the recognition that I come from a small-business background. Therefore, I know what it is like to try to get your invoices through. I have to admit that some of the research that we have done shows us that an awful lot of small businesses are so keen to get a contract—I know because I have done it in my time—that they do not read the small print and produce their invoices in exactly the way that a particular company wants to receive them. There is then an easy mechanism for them to say that the invoice is not suitable for payment. The Federation of Small Businesses, which the noble Lord cited, is well known to the ministry for business and meets regularly with us to help us develop and enforce the prompt payment code. More than 1,000 companies have signed up to that, some as big as Tesco and some as small as Mr Andrews, the plumber in my village of St Mawes.