An evil still lurks at the heart of the British economy: lateness

Cash flow problems account for a huge percentage of corporate bankruptcies. A change in the law, and our culture, might just give the economy a much-needed boost.

Sometimes parliamentary inquiries can be drab, dull affairs - events that feel compelled to occur for form's sake rather than for any great purpose. A recent special parliamentary inquiry however shone a light onto a dark and shameful corner of business culture in the UK, a culture that is undermining our economic recovery. The enquiry was looking into the UK's systemic late payment system and in particular the escalating impact overdue invoices are having on SMEs and their ability to stay afloat. As of the end of last year, outstanding debts to small and medium-sized business stood at a record £35.3bn in late payments - and large companies have been identified as the main culprits.

That the government is aware of this issue is of course to be applauded. A couple of months ago the Late Payments of Commercial Debts Regulations 2013 came into force, designed to protect small businesses struggling with cash flow due to late payment of invoices. However, this legislation only goes halfway to addressing the problem because it does not stipulate the length of time that an invoice must legally be paid by. The government should strongly consider imposing fines on serial late payers. Protecting SMEs with a mandatory payment time limit is a no-brainer and will surely be coming down the track at some stage.

This will take some time though. Therefore until the law is amended we need to start changing the culture in which large businesses sit on sizable cash reserves and hold SMEs hostage to their reluctance to pay in a timely fashion. My question to large businesses with ample liquidity is: what is there to gain in taking an age to pay a supplier? It engenders bad relationships, a negative perception of your brand and, worst of all; it slows economic growth – growth that you, the reluctant-to-pay business, could take advantage of. The great unintended consequence of this late payment culture is that the SME or start up – a growth engine for economic acceleration and source of so-called 'green shoots' - is being strangled at birth by its neglectful elders.

Cash flow problems account for a huge percentage of corporate bankruptcies: in 2008, for example, 4,000 UK businesses failed as a direct consequence of late payment. As of the end of 2011 the average small firm had approximately £45,000 of unpaid invoice debt sitting on its books, up from £39,000 from the previous half year. Furthermore, given that SMEs account for about 60 per cent of private sector employment, if their cash flow was more stable they might employ just one more person, which would make a huge difference to the overall level of unemployment. With lending shrinking at 2.5 per cent a year, despite the Government’s Funding for Lending Scheme, this is an escalating problem that, like a pestilent, is killing green shoots just as they begin to grow.

If large corporations start to pay their suppliers on time, i.e. within 30 to 60 days, we would see a sea change in business activity and, consequently, SME growth. As the saying has it, it's not rocket science, and is perhaps one of the simplest and most practical way of stimulating economic growth in our current flat lining economy.

Stop all the clocks - Overdue invoices are having a damaging effect on SMEs. Photograph: Getty Images.

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How the Lib Dems learned to love all-women shortlists

Yes, the sitting Lib Dem MPs are mostly white, middle-aged middle class men. But the party's not taking any chances. 

I can’t tell you who’ll be the Lib Dem candidate in Southport on 8 June, but I do know one thing about them. As they’re replacing a sitting Lib Dem (John Pugh is retiring) - they’ll be female.

The same is true in many of our top 20 target seats, including places like Lewes (Kelly-Marie Blundell), Yeovil (Daisy Benson), Thornbury and Yate (Clare Young), and Sutton and Cheam (Amna Ahmad). There was air punching in Lib Dem offices all over the country on Tuesday when it was announced Jo Swinson was standing again in East Dunbartonshire.

And while every current Lib Dem constituency MP will get showered with love and attention in the campaign, one will get rather more attention than most - it’s no coincidence that Tim Farron’s first stop of the campaign was in Richmond Park, standing side by side with Sarah Olney.

How so?

Because the party membership took a long look at itself after the 2015 election - and a rather longer look at the eight white, middle-aged middle class men (sorry chaps) who now formed the Parliamentary party and said - "we’ve really got to sort this out".

And so after decades of prevarication, we put a policy in place to deliberately increase the diversity of candidates.

Quietly, over the last two years, the Liberal Democrats have been putting candidates into place in key target constituencies . There were more than 300 in total before this week’s general election call, and many of them have been there for a year or more. And they’ve been selected under new procedures adopted at Lib Dem Spring Conference in 2016, designed to deliberately promote the diversity of candidates in winnable seats

This includes mandating all-women shortlists when selecting candidates who are replacing sitting MPs, similar rules in our strongest electoral regions. In our top 10 per cent of constituencies, there is a requirement that at least two candidates are shortlisted from underrepresented groups on every list. We became the first party to reserve spaces on the shortlists of winnable seats for underrepresented candidates including women, BAME, LGBT+ and disabled candidates

It’s not going to be perfect - the hugely welcome return of Lib Dem grandees like Vince Cable, Ed Davey and Julian Huppert to their old stomping grounds will strengthen the party but not our gender imbalance. But excluding those former MPs coming back to the fray, every top 20 target constituency bar one has to date selected a female candidate.

Equality (together with liberty and community) is one of the three key values framed in the preamble to the Lib Dem constitution. It’s a relief that after this election, the Liberal Democratic party in the Commons will reflect that aspiration rather better than it has done in the past.

Richard Morris blogs at A View From Ham Common, which was named Best New Blog at the 2011 Lib Dem Conference

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