Enterprise Bill [Lords]

Andrew Bridgen Excerpts

Tuesday 2nd February 2016 Commons Chamber

[Lucy Frazer (South East Cambridgeshire) (Con)]

Small businesses are critical to our economy and make up 99% of businesses nationally, and the Bill is designed to assist them. I want to focus on the resolution of disputes and debt collection, and I refer to my entry in the Register of Members’ Financial Interests. As a barrister who specialises in business law, and insolvency in particular, I have seen at first hand the impact that uncollected debts can have on a company.

Sometimes the inability to collect debts can have a significant impact on a small company. The most obvious consequence is simply the customer’s failure to pay, which means that their supplier is out of pocket. We know from BACS that an average small business has overdue payments of almost £32,000. However, it is not just the lack of cash flow, it is also the cost of collecting debts, and we know that £10 billion is spent per year in trying to recover overdue payments. It is not just the expense; it is also about management time, and in the end many small businesses simply give up. Indeed, the consequences can be even greater than that—sometimes they mean a lack of survival. R3, the trade body for the insolvency profession, has said that late payment by customers for goods and services is often cited as a cause of insolvency.

[Andrew Bridgen (North West Leicestershire) (Con)]

My hon. Friend is giving a great speech with her experience in insolvency. Does she agree that companies do not go bankrupt because they run out of profit; they go bankrupt because they run out of money, and late payment is part of that?

[Lucy Frazer]

That is absolutely right. Often, the cause is cash-flow insolvency, which is a test of insolvency, as well as the balance sheet.

The measures to introduce a small business commissioner to give free advice and information, and to operate a complaints scheme, are a welcome step in the right direction. Indeed, a similar scheme set up in Victoria Australia has had considerable success. The hon. Member for Wallasey (Ms Eagle) suggested that the Bill does not go far enough, but in 2014-15, with 704 mediation sessions, the Victoria scheme had an 80% success rate.

As my hon. Friends the Members for Huntingdon (Mr Djanogly) and for South Ribble (Seema Kennedy) mentioned, we must ensure the success of this scheme, and to do that, we must ensure that the small business commissioner has good identity, good awareness, and is effective.

We need to ensure that the person appointed has the gravitas to command the respect of businesses big and small. We need to ensure there is public awareness of the role. There are already a number of mechanisms to resolve disputes—there is already a free small claims mediation telephone service—but such schemes are successful only if the public know about them and so can use them. Finally, the small business commissioner will have to take full advantage of his or her powers to ensure speed, efficiency and an effective service.

The measures set out in the Bill are extremely welcome. The Government do not create jobs; businesses—often small businesses—do. It is our job to create the right environment for them to thrive in. This is a significant part of that process.