New plans aimed to help SMEs tackle late without incurring legal costs

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The government has announced plans to appoint a late payment tsar to clear up issues over late payments to small businesses.

A small business commissioner will tackle the estimated £26bn owed to small firms by assisting SMEs in chasing down their debts.

Business minister Anna Soubry said the role will help small businesses grow effectively and create more jobs.

In a report launching the plans, Soubry said: “Small businesses are responsible for 48% of UK private sector employment. And they are responsible for around a third of private sector turnover. So it is in all of our interests that we have a business environment where they can carry out their day to day business and thrive.

“But sometimes small business owners can struggle in their commercial dealings with larger firms. These businesses can feel they are treated unfairly where they have weaker bargaining power.

“Disputes between two firms can be a drain on both parties but the biggest impact is likely to be on the small firm.”

According to the plan, businesses who do not pay on time will be named and shamed, and small firms will be offered mediation services to avoid having to spend higher sums going to court to recoup money they are owed.

Soubry added: “I want to set up a Small Business Commissioner to help bring about a change in how businesses deal with each other - a long-lasting culture change - to ensure fair treatment for all. I want the Commissioner to help small businesses settle disputes quickly and cheaply so they can spend the maximum time possible running their business, while still preserving their commercial relationships.”

Rudi Klein, chief executive at the Specialist Engineering Contractors group and Brian Berry, chief executive of the Federation of Master Buildersboth welcomed the proposals with Berry saying that “successfully tackling late payment by large firms to small firms is something that has evaded successive governments – cracking this problem will be extremely difficult but certainly not impossible”.

Klein added that the remit of the commissioner would need to have “the power to enforce payments and apply penalties to regular defaulters” to be effective, in orer to ensure it didn’t become “just another initiative lacking in substance.”

In a discussion paper the government said that the new Commissioner would act as a strong disincentive to poor practices. A public consultation on the plans new plans runs until August 21.