The Federation of Small Businesses (FSB) has said that proposed Labour plans to help small businesses get their unpaid invoices paid on time are “exactly what the UK’s 5.5m SMEs need”.
Under the proposals, big businesses would be required to provide details on their company’s payment practices in their annual report.
This would require audit committees to issue a report on late payments. It added that more than £20bn in unpaid invoices are outstanding at any one time, costing small businesses £684m.
Labour noted that late payments act as a hindrance to growth and productivity for the UK’s small businesses, with money that could be spent on new technology and training for staff wasted trying to chase these unpaid amounts.
It added that research has found this is a bigger problem for British businesses than their European equivalents, with two in five SME business owners saying that they have suffered poor mental health as a result of unpaid invoices, with a third reporting sleepless nights.
The Labour plans to deal with the late payments crisis join a raft of recent announcements to grow the UK’s economy which includes plans to invest in the country’s clean energy potential and an industrial strategy aimed at reviving manufacturing.
In a recent speech to the CBI, Labour leader Keir Starmer said that the UK should be a country where “aspiration is rewarded” and that he wants to give the UK its “hope and its future back”.
Tina McKenzie, policy and advocacy chair of the FSB, said: “Many small businesses are being held back by a culture that says it’s acceptable to pay them late.
“The laws are currently slack and supplier interest must be represented at the top of the chain, or this could have a chilling impact on the economy.”
She added that “Labour is showing that they ‘get it’ when it comes to what small businesses need from government”.