Legislation essential to tackle issue of late payments, lobby group believes
● Survey finds almost half of company directors have suffered in last six months
There has been a call for legislation to tackle the “unacceptable” issue of late payments, after a survey of company directors found that almost half have suffered due to the issue in the last six months.
The poll by the Institute of Directors (IOD) showed that three in ten business leaders see “excessively bureaucratic payments systems” as the main reason for late payments, and just over a fifth said it was due to “grossly unfair” terms or practices used by larger firms.
The IOD said the collapse in January of Carillion shone a spotlight on the issue, but added that its own findings show the problem extends beyond the construction sector.
It found that one in five IOD members, who predominately run SMES, support the reporting requirements for large companies introduced last year, but this measure is yet to bed in.
David Watt, executive director of IOD Scotland, said it is “unacceptable” that so many firms battle to claim the money they are owed.
“Chasing late payments can have a particularly damaging effect on our SMES, and in some cases it can be so bad the SME is forced to fold due to a backlog of unpaid invoices.”
He added that a power imbalance between small firms and their larger customers lies at the heart of the matter. “Scotland is a small nation, and SMES are the lifeblood of our economy. Legislation may be the only way to ensure that companies have to pay their invoices on time, and government should be taking action to protect our businesses.
Meanwhile, a separate release found that Scotland’s SMES expect revenue growth to accelerate over the coming year despite believing business conditions will worsen.
According to the first SME Growth Tracker of 2018, commissioned by Enterprise Nation and Amazon UK, SMES north of the Border forecast revenue and jobs growth to grow to 2.1 per cent and 1 per cent respectively in the coming year. That is about double the jump in revenue and jobs growth expected last quarter.
The tracker also found that while confidence in the UK economy increased quarter on quarter, Scotland’s SMES remain the most pessimistic about the UK economy, with a score of -29 compared to -18 nationally. Mark Pragnell, chief project economist at Capital Economics, said that since launching the tracker soon after the EU referendum, “we’ve seen a pattern emerge showing SMES in the majority of regions that primarily voted to leave the EU consistently more optimistic than SMES in regions that voted remain”.