Small firms bear brunt of big business’s failure to pay bills on time

BRITAIN’S big companies are facing calls to sign up to a prompt payment code as it emerged that they owe smaller firms a record £35 billion in unpaid invoices.

New research from Bacs Payment Schemes, the company behind direct debit, showed the average small firm was owed £45,000 at the end of 2011, against £39,000 six months earlier.

The total bill of £35.3bn is £2bn up on the last reported figure in June and adds to the cash flow problems already faced by many businesses struggling against the tide of public spending cuts, squeezed consumer spending power and difficulties obtaining credit from banks.

Andy Willox, Scottish policy convenor for the Federation of Small Businesses, said the statistics were “enraging if not surprising”.

“During the last five years, the small business community has been squeezed between tightening credit conditions and big businesses that choose not to pay fairly,” he said.

The FSB argues that companies that win public work should be forced to pay their sub-contractors on time. The group says it already has the support of some MPs and MSPs.

“We’ve long argued that government in Edinburgh and London needs to better understand the pressure big corporates often put their supply chain under,” Willox said. “To us, enforcing sub-contract payment clauses on large public contracts seems like a good place to start.”

The latest research shows 785,000 small and medium sized enterprises are experiencing late payment. The number has fallen slightly from earlier in the year, but businesses are owed more and are waiting longer for their invoices to be settled. SMEs said they were waiting on average 29.6 days longer than agreed payment terms, an increase over the 28-day delay reported in the first half of 2011.