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UK minister to review overdue payments to small businesses

UK minister to review overdue payments to small businesses

 


As the UK government seeks to help UK businesses through the downturn, UK ministers are launching an examination of the long-standing problem of small businesses struggling with late payments from large corporations.

New small business minister Kevin Hollinrake told the Financial Times that it is essential to help small businesses secure expedited payments after they deliver goods or services to large corporations.

He also said the government would review the ministers’ recent decision to cut the R&D tax credit available to small businesses. Tax relief is widely used by startups and small businesses.

Hollinrake acknowledged that as the UK enters a recession, there are concerns about an increase in bankruptcies, particularly among heavily indebted businesses, particularly in the hospitality sector.

He said part of the government’s support for small businesses is revisiting delinquencies.

The government has issued a payment and cash flow review that will scrutinize existing measures that force large corporations to quickly pay their smaller suppliers.

According to government data, more than 23.4 billion small businesses owe outstanding invoices. The review includes expedited payment codes that encourage voluntary settlement of most invoices within 30 days, and the Small Business Commissioner’s role in resolving delinquencies.

Craig Beaumont, director of external affairs for the Federation of Small Businesses, said public policy changes to address late fees have stalled for several years.

There is cause for hope if the new ministers can breathe new life into this and not just kick the road to the election with more negotiations covered up.

Hollinrake, chair of the all-party parliamentary group on fair business banking, said there were market failures in certain areas of small business.

The Government’s Late Fees Review will also look at ways lenders can help small businesses manage their cash flow and identify barriers to access to finance.

Hollinrake said ministers are working to address these issues, including the government’s start-up loan program and a business investment plan that provides tax relief to investors who finance eligible businesses.

He highlighted other government support for small businesses, such as the Energy Rate Relief Scheme, which gives businesses a six-month discount on their gas and electricity bills.

He will lobby for continued help for some small businesses following a future review of the plan.

The government said state support for businesses’ energy bills would target a limited number of vulnerable businesses starting next spring, raising fears that other businesses would face significant increases in gas and electricity costs.

Hollinrake said there are some businesses that are unable to pass on price increases to their customers and moderate their energy use. There will be continued support for the most vulnerable sectors.

Hollinrake wants to help grow small businesses and points to data showing that the UK ranks first in the OECD for start-ups, but 13th for slightly larger businesses called scale-ups. We need to bridge that gap, he said.

Meanwhile, after protests from small businesses, the Treasury Department is scheduled to meet with business leaders next week to discuss steps to curb the R&D tax credit, a source said.

Hollinrake said the move to limit the tax cut reflected concerns about fraud, but added that the Treasury was watching.

Government officials said R&D, like all tax policies, is under constant review. It is the standard for policy engagement for public officials to meet and consult with various stakeholders across the industry.

Hollinrake, the founder of a chain of real estate agents, described his business career as Churchill portrayed Americans.

He said: I know what it is like to run a business. It’s fantastic, but I also know what it’s like to lie awake at night worrying about when to pay the bills. Uneasy. And I want to make it easier.

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