Prompt payment laws branded a failure

Isme

, the small business lobby group, says regulations to encourage prompt payment of business debts to small firms are a “failure”. The organisation wants the Government to introduce a statutory scheme where businesses would be obliged to settle trade debts 30 days after the end of the calendar month when the debt was accrued.

The latest Isme Credit Watch survey, which was completed by more than 1,100 respondents before Christmas, shows that on average smaller businesses wait 62 days to be paid, down from 63 days in the previous quarter.

Credit regime
However, the survey also shows that only 3 per cent of small businesses charge interest on late payments – a central plank of earlier government attempts to address the issue – and Isme now wants the Government to phase in a mandatory 30-day credit regime over the next three years.

"An average of 62 days is still too long. The fact that less than 3 per cent of businesses can charge interest on overdue payments clearly shows the failure of the legislation to assist SMEs in the unequal struggle with larger customers," said Mark Fielding, the Isme chief executive.

More than four fifths of the survey's respondents want the Government to step in and set a limit on credit transactions.

Abuse by larger firms
"The abuse by larger firms continues unabated. It is now time to listen to the 84 per cent of SMEs who favour a mandatory 30-day payment regime, with no exceptions," said Mr Fielding.

Isme wants a mandatory scheme phased in over three years, with the limit sliding from 60 days in year one to 30 days by the end of the third year. The credit watch study also found that 30 per cent of SMEs experience payment delays of three months or more.

No help
Late interest is charged by 9 per cent of medium sized businesses, but by only 2 per cent of "micro" and small businesses. "The fact that the larger business, the more likely they are to charge interest, shows the complete failure of legislation to help smaller enterprises," said Mr Fielding.