[Mr Jim Hood in the Chair] — Late Payments (SMEs)

Part of the debate – in Westminster Hall at 9:30 am on 14th September 2011.

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Photo of Debbie Abrahams Debbie Abrahams Labour, Oldham East and Saddleworth 9:30 am, 14th September 2011

I agree that the action needs to be comprehensive, and I will mention that at the end of my speech.

The impact of late payment can be disastrous, as we have heard. During the recent recession, an estimated 4,000 businesses failed as a direct result of late payments. Small businesses do not have the cash-flow buffers of larger companies so, in turn, they often pay their suppliers later than they would like, and a downward spiral develops.

The BIS Barometer survey for 2010, from the Department for Business, Innovation and Skills, showed that 60% of businesses have noticeable cash-flow issues and that for 25% of them that is a big problem. The knock-on effects of late payments include the inability of SMEs to access capital from banks and other financial institutions. In the FSB survey, 18% of businesses cited poor cash flow as the reason for a loan application being unsuccessful.