Yesterday's call by small businesses for a statutory right to interest on late payments should not be necessary. That it is needed illustrates the unpalatable fact that, in one way at least, British businesses are less straightforward than their Continental counterparts.
The Forum of Private Business yesterday renewed its call for a Bill that would enable firms to collect interest on overdue commercial debt. At the same time it pointed out that privately owned UK businesses are owed about pounds 50bn in late trade credit at any one time.
This sum exceeds private business bank borrowing, currently about pounds 44bn. And this figure consists entirely of overdue debts, in other words pounds 50bn-worth of broken contracts. This reflects a deep-seated business culture in the UK of 'the cheque's in the post,' a culture that does not exist to anything like the same extent in Italy where, whatever else their faults, firms can demand interest on debts that remain unpaid after the due date.
This is the forum's trump card. Most other European Community countries already have statutory interest on overdue payments, according to the forum, and consequently the UK has the worst repayment record in Europe.
The Government has so far opposed similar legislation by arguing that the countries with such rules already also have far longer average payment periods. When companies in France and Italy are confronted with paying interest on late payments, they compensate by lengthening the possible payment time in the contract.
But this does not undermine the case for new law. Although payment might take longer to arrive than in the UK, it arrives when it is due. This allows small firms - and their banks - to plan their finances secure in the knowledge that cash will flow in when it is supposed to. European unity may be in tatters, but this is one area where the UK should emulate its Continental cousins.Reuse content