Universal Credit Roll-out

Debate between Debbie Abrahams and Mark Pawsey

Wednesday 18th October 2017 Commons Chamber

[Debbie Abrahams]

Absolutely, and I will go on to make those points in a moment.

Getting back to the principles, we supported those then and we support them now. The Government wanted to pilot the implementation of UC, so they introduced a number of pathfinder areas, including my Oldham constituency, and planned a phased roll-out between 2013 and 2017.

[Mark Pawsey (Rugby) (Con)]

My constituency was also a pathfinder, and since the introduction of UC in 2012, the claimant count in my constituency has halved. Does the hon. Lady think the two issues are connected?

[Debbie Abrahams]

There may be many and varied reasons why the claimant count is down, not least the system of punitive sanctions the Government also introduced in 2012.

Small Businesses

Debate between Debbie Abrahams and Mark Pawsey

Thursday 28th November 2013 Commons Chamber

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

It is a pleasure to follow the hon. Member for Norwich North (Chloe Smith) and to co-sponsor this debate, and I congratulate the hon. Member for Newton Abbot (Anne Marie Morris) on securing it. I am pleased to speak in this debate, which considers how we can overcome the issues facing small businesses. Small businesses, which in my definition are those with fewer than 50 employees, are the powerhouse of the economy. They contribute 46% of the UK’s income in the private sector—a massive £l,558 billion—and constitute more than 99% of all businesses. Ultimately, a sustained recovery will be built on their backs, as has been said, and that must be recognised.

A whole range of different factors affect the success and even the viability of small businesses, including access to finance, the high costs of business rates and energy bills, but I will focus my remarks specifically on late payments. Hon. Members may know that for the past two and a half years I have run a campaign on late payments. It started as a small, local issue after a haulier came to one of my surgeries and said that he was going to go out of business because of late payments. The average term he was being given was 30 days, but he was often not being paid for 90 days. That is a common story that I wanted to look into in more detail.

I tried to discover the scale of the problem and it was striking that so few businesses would come forward and describe what they were experiencing. That was until one brave local couple, who started a plumbing business 35 years ago, came to me and said that their business was going under—as indeed it did with debts of more than £150,000 due specifically to late payment.

[Mark Pawsey]

Is the hon. Lady confusing late payments with customers who refuse or do not have the means to pay? Those are totally separate issues and if a business wants to avoid the problem of late payment, it can refuse to supply goods to the customer until the account has been paid.

[Debbie Abrahams]

I thank the hon. Gentleman for his intervention, if slightly patronising. I have gone into the issue in quite a bit of detail, and it was a specific point about late payments.

Let me give a bit of background to this case. As I said, the story of Ann and Harry Long is far from unique and is a particular problem for small and micro-businesses that do not have the cash-flow buffers of larger companies. I have a particularly a high level of micro-companies in my constituency—more than 85% of companies have fewer than 10 employees—and a number have gone into administration, primarily as a result of late payments.

Nationally, we know from Bacs that more than £31 billion is owed to small businesses, and more than half—58%—of the country’s 1.7 million SMEs say that large companies choose when they pay. In 2011, only £24 billion was owed, so the problem is increasing. If we compare what is owed in late payments to the amounts being lent by high street banks, which last year was £56 billion, we sense the scale of the problem.

According to Bacs data, the average SME is owed £31,000 at any one time and waits an average of eight working weeks for payment, which is nearly double the contract terms. I am particularly concerned about the gaping north-south divide. Small businesses in the north say that they are owed an average of £39,000, which is almost double the £23,000 owed to the average southern business.

The 2012 small business survey reported that 55% of SMEs, 53% of small businesses and 46% of micro-businesses say that large companies are not paying their bills on time. The most recent Federation of Small Businesses survey suggests an even worse picture. Seventy-three per cent. of businesses say that they were paid late in the past 12 months, and one in five say that half of all invoices are paid late. Interestingly, 70% say that the problem has got worse in the past 12 months and that the private sector is the biggest culprit.

Research by the Forum of Private Business last year indicated that late payment is having a significant impact on businesses development, productivity and growth. Access to, and the cost of, finance, and credit trade insurance, were cited as problems linked to late payment. Late payments have a knock-on effect, leaving many small businesses in a vicious cycle of late payment. The FPB’s economy watch panel indicates that 42% of SMEs believe that late payments were not seen as important.

As we have heard, the impact of late payment can be disastrous. It is estimated that, during the 2008 recession, 4,000 businesses failed as a direct result of late payments. No official data have been collected, but the situation needs to be monitored. There is growing evidence that late payments to SMEs are hurting our economic recovery. Office for National Statistics data show that SMEs make up to 98% of the total number of organisations, providing 59% of all private sector jobs and 45% of all employment, and generating 46% of the UK’s income.

What is being done to tackle the problem of late payments? The previous Government introduced the Late Payment of Commercial Debts (Interest) Act 1998, but it was not used, because companies feared being blacklisted. The prompt payment code, a tool introduced by the Institute of Credit Management, committed signatories to pay suppliers on time under the terms agreed without attempting to change payment terms retrospectively, enabling every level of the supply chain to meet the terms. However, the code has had mixed effects. First, there is a very poor take-up by FTSE 100 companies.