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

Part of the debate – in Westminster Hall at 9:45 am on 14th September 2011.

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Photo of Lorely Burt Lorely Burt Chair of the Liberal Democrat Parliamentary Party 9:45 am, 14th September 2011

I congratulate Debbie Abrahams on securing this important debate. I am sorry that at the end she accused the Government of engaging in public sector bashing. This debate is much more important than scoring political points.

The “squeezed middle” is a phrase that we do not often use in relation to companies, but it is exactly what is happening to small businesses in this country. They are being squeezed on one side by their suppliers, and the late payments that the hon. Lady so eloquently described, and by the banks on the other side. They cannot obtain credit, and their tragic situation is worsening, as the hon. Lady said, and as the constituents who are here today illustrate.

Small businesses are much more fragile than larger ones, so having to endure late payment costs jobs and inhibits growth. Big companies with more than 500 employees pay, on average, 35 days late, but small companies with fewer than 100 employees pay, on average, 19 days late. Big companies have a great deal more relative credit than small companies, and big companies get fatter while small companies struggle and get leaner. However, as I said during my intervention, coming down hard on big businesses may be counter-productive, and may deter them from trading with smaller businesses.

The hon. Lady referred to the prompt payment code, which was launched last year by the Institute of Credit Management on behalf of the Department for Business, Innovation and Skills. Companies promised to keep to payment terms agreed at the outset of a contract. However, I understand that fewer than 1,000 companies have signed up. What can the Government do to encourage many more companies to sign up to the prompt payment code?