To Pay or Not to Pay Quarter Day Rent & Business Rates – the latest

Quarter Day RentAs if the pressure and worries SMEs are facing due to the Coronavirus pandemic were not enough, yesterday (Wednesday) was when Quarter Day Rent was due to be paid.

For many, it was also a payment date for business rates although the government has suspended these for a year.

While SMEs may be eligible for suspending the payment of business rates as announced by the Chancellor in his first set of measures to help businesses survive the pandemic, little had so far been said about rent.

However, yesterday, the Government published details of three months’ protection for businesses from eviction for failure to pay rent. While is included in the emergency powers legislation that is due to be given Royal Assent today but we are still awaiting confirmation. There more details here.

Some businesses had already declared their intention to miss paying their Quarter Day Rent, like, for example Burger King, whose CEO Alasdair Murdoch announced on Tuesday that the company would not be paying the rent due on its UK restaurants this week.

According to the BBC, it seems that “Banks have been told [by the government] to be supportive as long as landlords act responsibly.”

It also reported that the government has said shops will not forfeit leases if they do not pay but will have to pay arrears in the future.

This may be the case, but many smaller SMEs have been unsure about what they are supposed to do given the latest set of restrictions enforcing the closure of non-essential businesses and the virtual lockdown of the population. Presumably more details will emerge once the emergency powers legislation has been published.

For many withholding rent may be necessary but there are consequences and you should speak with your landlord since the pain needs to be shared between both of you if you are both to survive. If however you are being pressurised by your landlord, there are a number of surveyors who specialise in negotiating rent reductions. It is wort remembering that your landlord won’t be finding a new tenant in the near future.

Meanwhile, the suspension of business rates is helpful as will be the grants to smaller SMEs.

On top of this bank branches are closing, there are two hour waits on hold in telephone queues and most systems seem to be overloaded.

It is admittedly a massive task to roll out so many measures to help and support SMEs but if you are a business worrying about protecting its future it is very hard to be told to be patient.

To provide more information about business rates and grants, I am maintaining an update on the support available for SMEs in my guide at onlineturnaroundguru.com.

At the current moment on business rates this is the situation:

A one-off grant of £10,000 is available to eligible businesses to help meet their ongoing business costs and applies to those businesses that occupy property that is eligible for small business rate relief or rural rate relief.

There will be cash grants to retail, hospitality and leisure businesses, based on the rateable value of your business property. Those with a rateable value of under £15,000 will receive a grant of £10,000. Those with a rateable value of between £15,001 and £51,000 will receive a grant of £25,000.

All retail, hospitality and leisure businesses in England including covers shops, restaurants, cafes, drinking establishments, cinemas and live music venues and premises used for assembly and leisure. It also covers hotels, guest & boarding houses and self-catering accommodation. Will be given a one-year business rate holiday.

Administering all these will be the responsibility of your local authority and while you do not need to do anything to claim them it may be wise to register your business as paying by direct debit so that your bank details are registered with the local authority  and you should keep an eye on the situation with your relevant authority.

Please be assured that as more details on the various Government measures to support businesses emerge or if anything changes I will update the information as soon as possible.

For more business help please go to onlineturnaroundguru.com.

Above all, if you need help and support I am here for you.

 

In a crisis it is crucial that SMEs keep staff updated, especially those working at home

working at homeIn the current Coronavirus-induced crisis people are understandably worried and frightened, for their jobs, their families and their health so it is crucial for SME employers to communicate changes as quickly and sympathetically as possible.

After all, while you as SME owners are currently facing unprecedented challenges to your business and feeling bleak if not panic ridden about your prospects for survival, at some point this crisis will come to an end and you will hope to still have a business.

With all the financial support measures recently announced by the Government, most SMEs do not need to close their businesses or dispense with staff.

I have posted the latest information with advice for SMEs on how to deal with the coronavirus pandemic on onlineturnaroundguru.com and will update as the details become clearer.

While in the short term SMEs may have had to ‘furlough workers’ (see the above advice link for what this means) but eventually staff will be needed back at work.

Staff are most likely to remain loyal if they feel their employer has done their utmost to help and has kept them informed of developments and these days the technology available is so extensive that this is much easier to do – whether it be a conference call or virtual meeting via an online platform to people who are working from home.

McKinsey.com has some very useful guidance for leaders coping with a crisis.

Firstly, it says: “they cannot respond as they would in a routine emergency, by following plans that had been drawn up in advance. During a crisis, which is ruled by unfamiliarity and uncertainty, effective responses are largely improvised.”

It is also crucial, it says, to promote “psychological safety so people can openly discuss ideas, questions, and concerns without fear of repercussions”.

This means dealing with the human tragedy first and foremost with empathy and understanding as well as being transparent about the circumstances.

If the situation means the way the company does business SME employers should discuss the options as soon as possible.

Acas also has some useful advice:

“Where work can be done at home, the employer could:

  • ask staff who have work laptops or mobile phones to take them home so they can carry on working
  • arrange paperwork tasks that can be done at home for staff who do not work on computers.

 

If an employer and employee agree to working at home, the employer should pay the employee as usual, keep in regular contact and check on the employee’s health and wellbeing.

You may be able to pivot your business in such a way that it can keep going, as this London SME restaurant chain has done after the Government ordered all restaurant and pubs to close.

Leon is to turn its 65 UK restaurants into shops, selling meals via both click-and-collect and delivery from Wednesday. Meals will be placed in ready meal-type plastic pouches which are refrigerated and can be heated, stored or frozen at home.

The company’s founder John Vincent has said the move could save Leon as a business but also relieve some of the pressure on the food retail stores: “A lot of people in the industry are just giving up and shutting up shop. But we think this way we can keep 60% of our stores open and keep food production going.”

A good example of a business using agility at very short notice to survive and save staff jobs when It is important to consider the second and third order consequences of any decisions before acting on them while not delaying action.

Check out onlineturnaroundguru.com for more tips on survival

Otherwise please stay safe, you do not need to deal with this alone.

Maintaining a positive mindset about your business during the current crisis

maintain a positive mindsetNobody would deny that the current pandemic-induced situation is a worrying time for SME business owners but they should do everything they can to maintain a positive mindset.

It helps to see if there are potential opportunities for either new ways of working or new services that you can adopt, especially if the changes you make demonstrate a concern for the needs of others.

There have been some excellent examples among the smaller micro-businesses that have been remarkably agile in doing this very quickly. Many of these are likely to fall into the category of sole trader/self-employed for whom there does not yet appear to any Government financial help, so hats off to them for their agility.

Examples we have seen is the numbers of exercise and fitness, yoga, Zumba and other classes that have set up to carry on via video in response to the closure of their usual physical venues.  Not only does this mean that they are able to maintain the link with their clients but they have found a way for people to maintain a level of fitness if they do find themselves having to self-isolate.

The same applies to other types of coaching and mentoring, which can be done one to one via Skype and other platforms or can offer training sessions via video for people.

One independent brewery in Scotland has started making hand sanitiser at its distillery and is giving the product free to anyone who needs it. Perhaps not profitable but a good piece of marketing its social responsibility, which may lead to more people trying its main product!

Local pubs and restaurants, too, are demonstrating a positive mindset despite a drop in customers or actually having to close. Many independent restaurants, for example, have switched to producing and delivering ready-meals. Some local retailers have set up outside their shops and others are offering home deliveries of staple supplies such as bread, eggs, fresh meat, fruit and veg.

At the other end of the scale the Co-op has announced that it will create 5,000 store-based posts which will provide temporary employment for hospitality workers who have lost their jobs because of the coronavirus crisis and is simplifying its recruitment process so successful candidates can start work within days.

Of course, many SMEs have more immediate and pressing concerns keeping them awake at night, like how they are going to pay staff if they have suffered a catastrophic drop in customer orders given that there is as yet no sign of when the promised Government grants and loans will be available. In the meantime, staff expect their wages to be paid and most other overheads are having to be paid.

One example of the lack of understanding among many large firms is Funding Circle who were contacted on behalf of a client to discuss a short-term suspension of payments or at least interest only payments, they were not interested and said that they would issue demands on the personal guarantees they hold if ongoing payments were not made in full.

It doesn’t help that many firms have suspended all trading with the stopping of all payments to suppliers and placing new orders.

In these circumstances it will help to talk to an experienced turnaround and rescue adviser who can help SMEs manage their cash flow and assist with the urgent measures necessary to survive.

Remember, a problem shared is a problem halved!

Using the Pareto 80/20 Rule as a guide in your business

Pareto 80?20 RuleMany people in business are familiar with the Pareto 80/20 Rule, particularly the idea that 80% of their business comes from just 20% of customers or clients, or that 80% of their profits comes from 20% of orders, or that 80% of their profits come from 20% of products, or even that 80% of their sales are generated by 20% of their sales staff.

Understanding this can influence behaviour such as protecting the 20% that contribute the most or looking at how to improve the lower performing 80%.

Essentially the Pareto 80/20 Rule is simply a way of demonstrating that most things in life are not distributed evenly.

This can apply to everything but focuses on considering productivity as an output of time spent or as a return on investment. It looks at resources, in terms of people, time and cost with a view to optimising the output. Analysis of turnover and profits by customer, market segment and products to produce a pie chart is likely to highlight aspects of the Rule.

The 80/20 Rule is a guide that can be misused, While 20% workers may be measured as doing 80% of the work this rarely means that the work of remaining 80% is irrelevant. Indeed, it may be that 20% contribute to profitable work while 80% are necessary for the 20% to be productive. It does however show where to focus on improvements.

So how can businesses use the Pareto 80/20 Rule to improve their businesses?

To a large extent this is about identifying the processes, systems or activities on which to focus because they have the best potential for a return on the effort.

You might focus attention on customers perhaps with view to selling more to your best customers or to improving sales to the 80% with view to generating the same level of return as the 20%. This might be putting prices up or selling different products or even turning away unprofitable business or customers who are hard work.

You might focus on staff perhaps with a view to measuring and improving their working practices that in turn improve productivity. Can one person be trained to do several jobs? Or should teams be reorganised or shift patterns altered? Sales and delivery may benefit from reorganising those geographical or market segments for which they are responsible.

You might focus on your products and production. Do you reduce the number of suppliers or the stock held or number of products sold. Can one product replace several existing products? Should you outsource the manufacture of components?

The Pareto 80/20 Rule is, in short, a handy guide to where you might focus your attention for improvement, it should not be regarded as a fixed and immutable rule.

Something for everyone in the Spring budget – but will it be delivered?

Spring budgetWho could envy a Chancellor having to deliver a Spring budget just one month into the job and in the midst of a global pandemic?

The Spring budget came after the early morning announcement of by the BoE (Bank of England) of an interest rate cut from 0.75% to 0.25%. Was this an outgoing Governor stealing an incoming Chancellor’s thunder?

With short term measures to help businesses deal with the Covid-19 consequences and others dealing with the environment, infrastructure, business taxes and addressing regional inequality the Spring budget covered them all.

The headline was a commitment to invest in infrastructure in support of the government’s commitment to ‘level up’ the economy by focusing investment on the Midlands and North: “over the next five years, we will invest more than £600bn pounds in our future prosperity”.

Many worries of SMEs were addressed by the £30bn package of short term measures to deal with the consequences of the Covid-19 epidemic.

They included abolishing business rates altogether for a year for small retailers with a rateable value below £51,000 extended to include museums, art galleries, and theatres, caravan parks and gyms, small hotels and B&Bs, sports clubs, night clubs, club houses and guest houses.

There was also a promise that business rates as a whole would be reviewed later in the year.

Any firm that is currently eligible for the small business rates relief will also be able to claim a £3,000 cash grant.

The Government will also cover up to 80% of a coronavirus loan scheme to cover the cost of salaries and bills and will offer loans of up to £1.2m to support small and medium sized businesses.

£2bn will be allocated to cover firms employing fewer than 250 people that lose out because staff are off sick with the cost of a business having to have someone off work for up to 14 days refunded.

The benefits rules will be relaxed to enable those who currently do not qualify for sick pay, such as the self-employed and gig economy workers, to claim benefits, which will also now be paid from day one of sickness.

Fuel duty was also frozen for a further year, but tax relief on red diesel will be removed over two years albeit with an exemption for farmers, rail and fishing.

In the longer term and over the five years of the parliament, the much-anticipated £170bn spending on improving the transport infrastructure and addressing the regional imbalance was also confirmed.

This will benefit the construction industry and is no doubt part of another statement: “Today, I’m announcing the biggest ever investment in strategic roads and motorway – over £27bn of tarmac. That will pay for work on over 20 connections to ports and airports, over 100 junctions, 4,000 miles of road.”

Similarly, the Chancellor confirmed that more than 750 staff from the Treasury and other departments will move to a campus in the north of England, as well as significant investment on R & D and that at least £800m will be invested in a new blue skies research agency, modelled on ARPA in the US.

Among a host of environmental initiatives, a new tax on plastic packaging is to be introduced, as well as freezing the levy on electricity and raising it on gas from April 2022.

Given the uncertain prospects for the UK’s economy, how many of the longer-term promises will be realised is likely to depend on the Government’s ability to borrow at unprecedentedly low rates so that it remains to be seen how much of the longer-term spending will actually happen.

It also remains to be seen how difficult the processes by which SMEs can claim help for Covid-19 related losses will be and whether the promise to review business rates as a whole will materialise.

The PR spin is already in place such as RBS’s claim today that it will provide £5bn of support for SMEs when in practice the small print refers to this as an extension to existing loan and overdraft facilities.

Notwithstanding any cynicism the Chancellor’s rhetoric was optimistic claiming his budget was aimed at “Creating jobs. Cutting taxes. Keeping the cost of living low. Investing in our NHS. Investing in our public services. Investing in ideas. Backing business. Protecting our environment. Building roads. Building railways. Building colleges. Building houses. Building our Union.”

Sector – business in UK’s North and Midlands

UK's North and MidlandsThe UK’s North and Midlands were once the powerhouse for the country’s economy, with its manufacturing and engineering industries driving the Industrial Revolution in the late 19th Century.

Cities such as Leeds, Bradford, Manchester, Sheffield and Birmingham were the industrial heartland of UK when national economies depended heavily on what they could make and sell, from textiles to steel and heavy engineering machinery.

But as industry in UK declined, the UK economy shifted its focus to services and in particular to the professional and financial services with a lot manufacturing being transferred to countries such as India and China, where production costs were much lower. This was also associated with a shift in the UK economic centre of gravity from the Midlands and the North to London leaving much of the country behind.

Vestiges of industry have survived in places like Sunderland, where the Japanese car manufacture Nissan has thrived and recently increased its commitment by investing more than £50m in its plant that builds the Qashqai model.

According to a “State of the North” research by the IPPR (Institute for Public Policy Research) and reported in the Yorkshire Post  in November 2019, “only countries like Romania and South Korea are more divided” than the UK.

It found that “in Kensington and Chelsea and Hammersmith and Fulham, disposable income per person is £48,000 higher than in Blackburn with Darwen, Nottingham and Leicester”.

In December 2019 various reports by the Centre for Cities highlighted the issues. According to the Financial Times it had found that the economic divide between London and the rest of the UK widened last year.

The FT also quoted ONS (Office for National Statistics) figures that showed that “The UK capital recorded a 1.1 per cent annual rise in output per person to £54,700 in 2018, increasing the per capita gap with the poorest region — the North East — where growth was only 0.4 per cent to £23,600 per head”.

The Centre for Cities research analyses business and employment opportunities across the UK, finding that many northern cities are underperforming, hampered by a need for growth and by being at different economic stages in terms of availability of skilled workers and of infrastructure.

But there have been some signs of hope for the UK’s North and Midlands amid the gloom with the Centre for Entrepreneurs think-tank reporting that Birmingham is now the UK’s start-up capital outside London. The British Business Bank has also revealed that entrepreneurs in the north of England received more loans than those in London.

Business Live recently reported that figures from UK Powerhouse have shown that Stoke-on Trent has the fastest employment growth in the UK.

During the recent General Election much was made of pledges to level up the economy with heavy investment promised for the UK’s North and Midlands.

Among the promises made by the Government is a pledge to get on with the proposed HS2 railway to connect northern cities like Birmingham, Manchester and Leeds to London. It argues in support of this plan that “The Midlands already has the highest concentration of businesses outside London, including international firms such as Jaguar Land Rover, MG Motors, Deutsche Bank, JCB and the 150 year old, West Midlands-founded FTSE 250 engineering firm IMI”.

It has also promised “massive investment” in a new institute of technology to be based in Leeds, and to be modelled on MIT in the US (Massachusetts Institute of Technology) and there are suggestions that parts of the Treasury will be relocated to the North of England.

Whether these promises will be delivered remains to be seen, especially given the more immediate and pressing problems of the NHS demands due to the worldwide pandemic of Covid-19 now playing havoc with the global supply chain and countries’ economies.

Perhaps this week’s budget will provide some clues.

Employing millennials should not be a problem

employing millennialsEmploying millennials should not be seen as a problem but according to some reports in the business press many employers would prefer not to.

The reasons given range from this generation having a poorer grasp of language to being less loyal than older workers, and allegedly having higher absence rates.

Quite apart from the fact that age discrimination is outlawed under equal opportunities legislation, millennials (the generation born between 1980 and 2000) now make up the bulk of the workforce.

While it would be fair to say that employing millennials means bosses need to understand that this age group may view their careers rather differently from previous generations, it is also true that each generation comes with skills and attitudes that are a benefit to their employers. It is also true for many employers that they are customers who need to be understood.

Approximately 10 years ago PwC produced a report that focused on the millennial generation, examining their career aspirations, attitudes about work and level of comfort with new technologies. It predicted that they would make up 50% of the global workforce by 2020.

It also examined the key features that employers would need to understand about this generation: “Millennials’ use of technology clearly sets them apart. This generation has grown up with broadband, smartphones, laptops and social media being the norm, and expect instant access to information”.

This is clearly a benefit for 21st Century businesses.

However, the report continues that employers need to understand that it is a generation whose “behaviour is coloured by their experience of the global economic crisis and this generation places much more emphasis on their personal needs than on those of the organisation for which they work”.

This should be no surprise given that it has been a long time since employees of any age have been able to rely on the “one job for life” career model.

Couple this with having had to make compromises due to the 2008 global financial crisis, such as having to do work that is beneath their skill and education level. Indeed, they are often better educated than previous generations who tend to be more senior people in organisations and they are living with high levels of rent and living costs while at the same time they have been burdened with university debts that were not imposed on those who complain about them. It is hardly surprising therefore that many of them consider their income as derisory when compared to the income of others. Loyalty works both ways.

In addition, they are aware of other factors such as quality of life, environmental concerns, diversity, ethical business and equal opportunities which are becoming more important factors when deciding who to work for.

As older employees reach retirement and the likely restrictions on immigration, employing millennials is not going to be a choice and indeed employers should be looking for the best available skills for their businesses – or the potential to develop them.

It may mean that employers will need to re-think their rigid, hierarchical structures and use a more cohesive, mentoring approach to their management style.

They will need to pay more attention to employees’ training needs and careers aspirations, and to accommodate their increasing focus on environmental and social concerns.

Good workers know when they are being treated well and young people tend to be well able to adapt to a fast-changing world, accordingly employers should focus on helping young people to become good workers as a demonstration that they valued. Employees should no longer be regarded as a burden or treated as being lucky to have a job. It is now the other way round.

Survival in the 21st Century will involve businesses having to adapt rather than expecting their people to adapt.

While most businesses claim that their people are their greatest asset, the reality is only true when their people claim their business is the greatest employer.

Key Indicator: is the global supply chain too vulnerable to shocks?

global supply chainFor years, businesses have seen the global supply chain as a means of keeping down costs through sourcing goods and services from low-wage countries and importing them often from across the globe.

This may work as a business model for manufacturers seeking to keep their prices as low as possible, and for retailers’ cash management where payment terms and just in time delivery often meant only having to pay for goods after they have been sold. Indeed, stock ties up cash in inventory and storage as well as incurring the cost of warehousing, storage and administering stock, the less stock needed then the less cash needed.

But what happens if events cause a disruption to the smooth flow of the global supply chain causing shortages of finished goods or the essential elements for their production?

The current Coronavirus outbreak that originated in China and is now spreading across the globe provides the perfect illustration of the knock-on effects of such disruption.

According to an Economist article this week, by using a just in time model “multinationals have left themselves dangerously exposed to supply-chain risk owing to strategies designed to bring down their costs”.

Furthermore, it argues that in the last 20 or so years, large multinationals have become much more reliant on China. “China now accounts for 16% of global GDP, up from 4% back then. Its share of all exports in textiles and apparel is now 40% of the global total. It generates 26% of the world’s furniture exports.”

Chinese manufacturing activity fell to 35.7 from 50 in January, according to the PMI index where above 50 is a measure of anticipated growth and below is decline.

Among the industries significantly hit by China’s containment efforts, from isolating regions of the country to closing down factories, have been the electronics, car and clothing industries but they are not likely to be the only ones.

Companies that have already reported significant negative effects have included Apple, Diageo, Jaguar Land Rover and Volkswagen. But the impact is not just on manufacturing but also is on services with BA owner IAG and EasyJet forecasting significant reductions in bookings and cancelling flights.

The reduction in manufacturing output will also hit freight with both shipping and airfreight experiencing lower volumes that in turn impact oil prices that have fallen significantly to below $50 a barrel for the first time since the summer of 2017, according to an article in the Guardian.

Efforts to restrict the movement of people have already caused the cancellation of the Motor Show in Geneva, the Mobile World Congress in Barcelona and MIPIM, the annual real estate jamboree in Cannes.

All this has worried investors with stock markets plummeting around the world, in the case of the FTSE100, down 13% by the end of last week – a decline only last seen during the Financial Crisis of 2008.

Is it time to rethink business’ reliance on the global supply chain?

The current situation with Coronavirus illustrates the vulnerabilities in an over-reliance on the global supply chain and particularly the disproportionate sourcing of inventory from East Asia and China.

However, there are other potential sources of disruption to the supply chain. They include the ongoing tariff wars between China and USA, extreme weather events such as the 2011 tsunami in Japan, and armed conflicts.

Notwithstanding all these factors, arguably the greatest factor is global warming and environmental damage. The mood around the world is changing and people are becoming increasingly worried about this.

The fall-out from Coronavirus may be heightening awareness but demands from consumers and investors for a more ethical and socially conscious sourcing is beginning to concentrate the minds of CEOs on their businesses’ vulnerabilities to the global supply chain.

Indeed a knitwear manufacturer based in Leicester, UK, is reporting an increase in orders from more local retailers in the wake of the coronavirus outbreak.

Will others follow suit?

 

Learning to really listen can benefit your business

really listenHow many of us really listen to what is being said to us?

Listening is not the same as hearing and often we can tune out what is being said to us, either because it triggers an assumption or a prejudice, causing us to miss the real point of what is being said.

Being able to really listen, however, is crucial to both personal success and also that for a business particularly, but not only, for those in a customer services role, where it is crucial to really listen and respond appropriately to a customer’s concerns rather than parroting from a pre-prepared script.

How often are we frustrated by the tele salesperson who launches into their script without even pausing for breath.

Indeed, failure to really listen can have a serious impact on the reputation of a business with its clients or customers.

But the ability to listen well is equally important for a boss or manager wanting to communicate a change or an innovation, or to HR when dealing with issues with an employee. Both situations will invite feedback and this is where it is important that the person giving it is actively listened to.

Language can be a very imprecise tool. Every word is loaded with background information which to the listener can mean something quite different to how someone else would interpret the same sentence or word.

Arguably hearing is a passive activity whereas when you really listen to what is being said you are actively engaged in paying attention, considering and seeking to understand what is being communicated, both verbally and non-verbally.

It is possible to improve listening skills by doing some very simple things.

The first is to leave the ego at the door and demonstrate an open and welcoming approach, perhaps by using eye contact if possible and show that you are concentrating on what you are being told.

The second is to remind yourself to keep an open mind and allow other people to finish what they are saying rather than jumping in with a comment before they have finished. Not doing so will convey that you are making an assumption, perhaps based on something in their choice of words that triggers a reaction in you, that may be well wide of the mark and in so doing you are missing something that could be beneficial.

It helps to give feedback, especially if the conversation is on the phone, to ensure that you are clear about what they are saying. It can also help to make notes of key points so that you remember what was said, especially for your feedback and any future action.

Listening is an art that we are increasingly losing in a cacophonous age of social media and sound bites, where the emphasis seems to be on having one’s say and competing rather than really engaging with each other.

Late Payments putting even more pressure on SMEs in 2020

late payments penalty?The amount owed to UK SMEs in late payments had allegedly risen to £50bn in early January according to research by digital banking platform Tide as reported by CityAM.

It has calculated that the average UK SME is chasing five outstanding invoices at once, wasting an hour and a half every day.

Data from Pay UK, which runs the Bacs Direct Credit and Direct Debit payment services, later in the month revealed that late payments had reached a four-year high last year at £23bn.

Tide’s new £50bn total was considerably higher than Pay UK’s total of £23bn owed to SMEs and I cannot reconcile the two figures.  The Tide research was conducted by Atomik Research among 1,002 SME decision makers from the UK and, it appears, judging by a footnote to the Tide report, that its £50bn figure may have been estimated on the basis of a total of 5.9 million SMEs, as calculated by The Department for Business .

However, the situation puts immense pressure on SMEs, with some having had to resort to overdrafts, cutting their own salaries and personal loans to pay bills because their own are being paid late. This is highlighted by Paul Horlock, chief executive of Pay.UK who has said that for the first time their research has revealed the human cost in stress and anxiety to SME owners.

Rashmi Dube of legal practice Legatus Law and former director of TMA UK wrote in the Yorkshire Post that a third of payments to the SME sector are late, leaving 37% with cashflow difficulties, 30% forced into an overdraft and 20% suffering a slowdown in profits, with considerable knock-on effects to employees as well as business owners.

In an attempt to ensure the Government promises to strengthen the regime tackling late payments, the Labour peer, Lord Mendelsohn, introduced a private members bill in the Lords, aims to bring in fines for persistent late payers, shorten the deadline by which clients must pay suppliers from 60 to 30 days and force all companies with more than 250 staff to comply with the Prompt Payment Code.

Although Private Members’ Bills from the Lords are not generally debated in the Commons the move serves as a reminder to the Government of promises it has made.

Prior to the December election a wider package of reforms had been promised, including improved resources and increased powers, a tougher Prompt Payment Code and Audit Committees’ oversight of payment practices.

One of these promises has at least been kept in part, with the appointment of Philip King as interim Small Business Commissioner following the sacking of Paul Uppal last November over an alleged conflict of interest and pending the appointment of a permanent replacement.

Mr King, who was previously chief executive of the Chartered Institute of Credit Management (CICM), which was responsible for running the Prompt Payment Code, is transferring the administration of the Code to his new office, fulfilling the commitment made by government in June last year to bring late payments measures under one umbrella. This is a useful measure as the  CICM was focused on training income and mainly funded by large companies. Following the move, we can expect to see the naming and shaming of those large companies who withhold payment to their suppliers, many of them SMEs.

Meanwhile In February, another 11 large businesses have been suspended from the Prompt Payment Code for failing to pay suppliers on time. They include BAE Systems (Operations) Limited, Leonardo MW Limited, and Smiths Detection.

However, for many SMEs the wait, in my view, for tougher and more effective powers with real bite beyond the current regime of naming and shaming has been far too long. How many have been forced to give up the unequal struggle in the meantime and fallen into insolvency?