Peer’s ’30-day’ late payment bill could boost economy by £2.5bn immediately

Lord Mendelsohn with his wife, Nicola. Pic: the Times

Lord Mendelsohn's late payment legislation delayed due to Covid-19

Labour peer Lord Mendelsohn’s private members bill aimed at tackling late payment has got stuck in the log jam of legislation in the House of Lords due to the Covid-19 crisis.

Sittings and much of the business of the upper house of parliament have been suspended and curtailed due to the coronavirus emergency. The bill would legislate a 30-day limit for all invoice payments, enforced by the Small Business Commissioner which would have the power to impose large fines on repeat offenders. Small businesses would benefit the most with an estimated £2.5bn injected into the economy immediately if everyone paid no later than 30 days from the date of the invoice.

Late payment cripples SMEs

Lord Mendelsohn said: “Late payment is crippling small businesses while the UK economy is crying out for investment. By failing to tackle late payment we are starving our small businesses of the capacity to act. The recent huge escalation in outstanding payments shows that decades of promoting ‘culture change’ has only made things worse. This Bill will tackle the issue once and for all with a package of measures that is operable, impactful and measurable.”

The legislation has passed its first reading in January but still has several hurdles to jump before it becomes law including its passage through the House of Commons where it could gain a sympathetic hearing. However, private members bills rarely make it to the statute book due to the delays that accompany all business in parliament.

Ian Carrotte

Ian Carrotte of ICSM Credit said he hoped the bill would make it through parliament as late payment costed the average firm cash flow and stability. He said: "I understand the legislation would also ban predatory payment practices such as prompt payment discounts (fast payment in exchange for a discount), charges for onboarding and staying on supplier lists. If it was law far more businesses would make it through their first few years and go on to enhance the British economy without the handicap of essentially subsidising their customers.”

Ian Carrotte

Jeremy Chan writing for Accountancy Age explained: “In a 2016 report, The Federation of Self-Employed and Small Businesses (FSB) estimated that if all payments were made on time there would be a £2.5bn boost to the British economy. This would have kept 50,000 businesses operating. The same report found that the average value of a late payment invoice was £6,142 and more than a third (37%) of businesses reported running into cash flow problems, with 30% forced to use an overdraft. The average late payment has gone up to £8,500, according to figures published by Tide this year.

“With a third of all payments to small businesses being late, SMEs spend more than a working week chasing late payments – totalling 56.4 million hours a year according to an Intuit Quickbooks report published in November 2019.”

Sacked by Jeremy Corbyn

Jonathan Mendelsohn (now a Lord) has worked as a lobbyist in parliament for a number of commercial interests and was sacked by Jeremy Corbyn in 2018 when he attended the controversial Presidents Club dinner as part of his charity work.

Ian Carrotte of ICSM Credit said the bill if it succeeded would make a massive difference to many firms particularly with the Covid-19 crisis causing such catastrophic problems to business.

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