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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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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