Late payment legislation won’t help small agencies

Jo Faragher

Despite late payment legislation coming into force earlier this month, small agencies will still face “crucifying” payment terms, according to Beatrice Bartlay, managing director of staffing company 2B Interface (pictured).

The Department for Business, Innovation and Skills has announced new legislation implementing the European Directive 2011/7/EU on Combating Late Payment in Commercial Transactions. Under the legislation, businesses must pay all invoices within 60 days.

But Bartlay believes the legislation does not go far enough and should be 30 days. She said: “We are missing simple, practical, no-cost help to small businesses. A simple piece of legislation that insists that all payment terms have to be 30 days. What is strangling small business and economic recovery is the demands being placed on smaller companies by larger players at the contract stage.”

Often, smaller recruitment companies that operate within a larger supply chain must wait until the hiring company has paid the agency for which they are providing a service before they themselves can be paid. Yet the second-tier agency is still under obligation to pay the workers on its books.

Bartlay added: “For far too many small businesses the reality is ‘accept our terms or the business goes elsewhere’. So no matter what the Government says the reality is totally different and with so many so-called zombie companies out there, desperate to improve cash flow and survive this economic downturn, even 60 days is an unacceptable timeframe.”

The European Commission asserts that, with the introduction of late-payment legislation across all member states, it could mean an extra £150bn being made available to businesses and relieve cash flow problems.

Bartlay is not convinced, claiming that if larger companies faced the same payment terms they sometimes insist on for SMEs, it would ‘bring them to their knees’. She concluded: “There are numerous examples of large corporates sitting on huge piles of cash, so that while their cash flow remains solid, the lifeblood of the UK economy – the SME – is being drained away.”