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The Government must act on late payment

Alexander Jackman, Head of policy at the Forum of Private Business.

Businesses are right to be sceptical about the Government’s ability to tackle late payment. It is a notoriously difficult area to deal with, given the sensitivities the Government has to take into account among all business sectors and sizes.

However, where there has been a lot of work to date on trying to change the culture around payment, the forthcoming consultation aimed at helping small businesses get paid on time could help to provide the evidence base for a specific new proposal.

The little known EU Late Payment Directive is an attempt to aid businesses by allowing them to charge interest of 8.5% on bills that are more than 60 days late. Like most legislation in this area, it is only good if businesses are willing to use it. Quite understandably, many are reluctant to, fearing it will cost them customers.

Tucked away in clause 7 of the directive is the answer.

It clears the way for business intermediaries - such as the Forum of Private Business - to represent companies in challenging late payers and by so doing protect their anonymity.

In short, organisations like ours can play an important role in instructing barristers to challenge grossly unfair payment terms, creating case law and helping to create a better playing field for smaller businesses.

The consultation, which will open later this year and will ask for views on the prompt payment code and how it can be improved, is crucial to this proposal being taken forward.

It must provide the evidence that anonymity is a major barrier to the use of existing legislation. If it can, it supports our efforts to persuade the Government of the merit of using this new opportunity.

Promoting and supporting better finance for businesses is a key pillar of our work but we need all the companies we can to share their views with the Government on this important issue.

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