Competitiveness White Paper: Small businesses

EIGHT MEASURES to speed the payment of bills to small business, including a promise to involve the public sector in the campaign, are included in the White Paper.

But the Government confirmed its refusal to introduce legal penalties against late-payers, who have been blamed for the collapse of thousands of companies. The absence of legislation was condemned by small business leaders as a 'charter for cheats'.

Stan Mendham, of the Forum of Private Business, said that the Government had snubbed the views of more than 300 MPs who had supported an Early Day Motion to enforce payment of interest on overdue debts.

Dun & Bradstreet, which monitors the financial health of companies, said the decision was a blow to thousands of small and medium-sized firms where poor cash flow - because of late payment - was a principal cause of collapse.

Philip Mellor, a Dun & Bradstreet analyst, said the proposal for a British Standard of prompt payment, one of the measures outlined in the White Paper, to be developed in consultation with business, was 'yet another doomed attempt to cajole businesses to pay on time'.

Other proposals include:

A requirement for public companies to set out payment policies in annual reports and easier court procedures for debt recovery;

A review of small claims procedures, more advice on credit management, and an obligation for government departments and agencies to comply with the CBI prompt-payment code;

State organisations would also have to publish payment policies and details of how far they adhere to the CBI code and must publicise complaints procedures.

Lord Strathclyde, the small firms minister at the Department of Trade and Industry, said he was not convinced that statutory rights to interest on late payments would bring about the required change in business culture.

There was little evidence from elsewhere in Europe that a right to interest was effective, and though UK consultations had produced a small majority in favour of legislation many responses were heavily qualified. But if there is no improvement in two years there will be another review, he added.

Other measures for small firms include more Business Link services such as consultancy, including funding of Tecs to help out in that area, and the encouragement of private investors with money to spare who back growing firms.