Companies rush to law in pursuit of unpaid debts

SUING customers for debt has become a way of life for many British companies.

The number of organisations taking legal action has increased dramatically in the past 12 months. The proportion of small businesses using solicitors to recover debts has risen from 24 per cent to 41 per cent during that period, according to the Forum of Private Business.

Debt collection agencies are used by 38 per cent of small businesses, compared with 23 per cent last year. Lawyers who might once have seen the work as being beneath them are now eager to provide the service.

Tim Richards, head of the debt collection unit at City lawyers Linklaters & Paines, advises swift action when debts become due. He said: 'The fact that you aren't being paid may be the first sign that your customer is having financial difficulties.'

British companies are much more likely to resort to legal action than their counterparts in Europe, according to the European Business Survey published by accountants Grant Thornton.

While the Portuguese rely on the telephone to persuade customers to pay, the British are more likely to call up their lawyers. 'The whole idea is to ensure that your debts are brought to the top of the pile,' said Mr Richards.

Booth & Blackwell, a West End law firm, has installed a computer system to deal with debt recovery. Issuing a writ costs pounds 15. The firm then levies a percentage charge for debts recovered, decreasing from 7.5 per cent on the first pounds 1,000 to 2 per cent on debts of more than pounds 10,000.

Senior partner Trevor Sears believes that customer relations are not as damaged by legal action as many people believe. 'It doesn't do a business any good if they make threats which they don't carry through,' he said. 'Clients who do it seriously will be taken as serious by the people they supply.'

Many debtors have become adept at delaying the time of payment and are no longer upset by the sight of a solicitor's letter or writ. These are the kinds of customer who decide which bills to pay by the amount of pressure put on them by the creditors.

Atlas Copco Tools, an air tools manufacturer with a pounds 12m turnover, is typical of many businesses in its changing attitude to debt. 'We've tightened up by at least a week,' said Martyn Brooke, who is in charge of its debt recovery unit.

Mr Brooke does not use debt collection agencies - 'they aren't interested in the customer' - although he instructs solicitors when necessary. But he is still reluctant to take legal action. 'I'm a great believer in debt counselling. If you can help customers out, they will always come back to you. If they are willing to help themselves, I'm always willing to help them,' he said.

For debts of more than pounds 600, solicitors can take action in the High Court rather than the County Court. Delays of up to a month are quite common in the County Court, whereas the matter can be handled immediately in the High Court.

Another advantage of suing is the entitlement to interest. Until April, companies could claim the court's official interest rate of 15 per cent on unpaid debts. The rate has dropped to 8 per cent but is still attractive.

The increased interest in debt recovery is a byproduct of the recession. But it will not go away as economic conditions improve. Whole industries have changed their billing practices and hard-headed debt recovery practices have become respectable.

(Photograph omitted)

PROMOTED VIDEO
Life and Style
Sainsbury's could roll the lorries out across its whole fleet if they are successful
tech
Arts and Entertainment
tv
Sport
Ojo Onaolapo celebrates winning the bronze medal
commonwealth games
Arts and Entertainment
Rock band Led Zeppelin in the early 1970s
musicLed Zeppelin to release alternative Stairway To Heaven after 43 years
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmHe was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
Arts and Entertainment
Tracey Emin's 'My Bed' is returning to the Tate more than 15 years after it first caused shockwaves at the gallery
artTracey Emin's bed returns to the Tate after record sale
Arts and Entertainment
Smart mover: Peter Bazalgette
filmHow live cinema screenings can boost arts audiences
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Project Manager (HR)- Bristol - Upto £400 p/day

£350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...

Graduate / Trainee Recruitment Consultant - IT

£25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...

HR Business Partner - Banking Finance - Brentwood - £45K

£45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...

PA / Team Secretary - Wimbledon

£28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...

Day In a Page

Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
How live cinema screenings can boost arts audiences

How live cinema screenings can boost arts audiences

Broadcasting plays and exhibitions to cinemas is a sure-fire box office smash
Shipping container hotels: Pop-up hotels filling a niche

Pop-up hotels filling a niche

Spending the night in a shipping container doesn't sound appealing, but these mobile crash pads are popping up at the summer's biggest events
Native American headdresses are not fashion accessories

Feather dust-up

A Canadian festival has banned Native American headwear. Haven't we been here before?
Boris Johnson's war on diesel

Boris Johnson's war on diesel

11m cars here run on diesel. It's seen as a greener alternative to unleaded petrol. So why is London's mayor on a crusade against the black pump?
5 best waterproof cameras

Splash and flash: 5 best waterproof cameras

Don't let water stop you taking snaps with one of these machines that will take you from the sand to meters deep
The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
Countries that don’t survey their tigers risk losing them altogether

Countries that don’t survey their tigers risk losing them

Jonathon Porritt sounds the alarm
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz
A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc