The introduction of late payment regulations this week could cause difficulties for small firms which run the risk of being squeezed by larger companies, small firms lobby group ISME has said.
Separately, the Small Firms Association (SFA) warned in its autumn economic statement that the next quarter would be difficult for employment with the likelihood of further job losses and consolidation. From Wednesday, regulations on late payments for allcompanies will set a 30-day credit period and impose significant penalty interest on defaulters.
ISME said there were many positive aspects to the regulations but it is concerned that they do not create a level playing field for both big and small businesses.
Under the regulations, firms may contract out of the 30-day rule. ISME fears larger accountancy-led businesses will insist on the 30-day rule with their customers but will have the economic clout to demand longer credit from their own suppliers.
It also believes the regulations should have been introduced on a phased basis over three years, giving firms the time to switch over to the new 30-day deadline from the current average credit period of 60 days.
Finally, it is concerned that the regulations do not provide a dispute resolution facility in the case of non-compliance by one party.
The absence of such a facility means small firms would be forced into the expense of having to take legal action through the courts to secure a debt from a larger client.
ISME is calling for the introduction of a mechanism similar to the Small Claims Court, to settle disputes as they arise.
Meanwhile, the SFA warned that further job losses were inevitable, on top of the 9,000 jobs that have been lost in the economy in the first seven months of the year.
Recent research by the association suggests that there will be a significant downturn in employment creation in 2002 with demand for labour slowing to 6.5 per cent from 7.8 per cent in 2001 and 10.9 per cent in 2000.
Small firms will create 36,238 new jobs this year, down 21 per cent on last year and 44 per cent on the year before.
