Once seen as a 1980s issue, the needs of small business are firmly back on the agenda.
ENTERPRISING PACKAGE
The prime minister took the opportunity of the final Your Business Matters conference on March 11 to announce a package of measures to help small firms. These included:
improvement in late payment time by government departments and further steps against slow payers in big companies, to be decided after consultation (the prime minister said he favours requiring companies to publish not just their policy, as at present, but also their actual practice);
one-stop-shops for planning and development applications to local councils;
a single point of registration for VAT, national insurance and PAYE;
a review of industrial tribunals to encourage more voluntary settlements;
a review of financial and other small business support by government to ensure services are simple and well coordinated with Business Links.
The third competitiveness white paper, due in June will substantiate these proposals. The conference was the culmination of 11 regional events held since September 1995 and sponsored by Barclays, Lloyds, Midland and NatWest banks. Contact DTI Enquiries on 0171 215 5000
INTERNATIONAL LATE PAYERS
The average payment period for small-to-medium sized enterprise in the UK is 50 days compared to an EU average of 61. A European Business survey by accountants Grant Thornton, published on February 19, says the equivalent figure for Germany is 38 and for France 64. In Italy and Spain, where there is a right to interest on overdue bills enforceable through the courts, the figures are 84 and 73 respectively. By contrast Scandinavian countries, the best in Europe at around 30 days, have tough late payment rules without involving lawyers. The results are based on a 12% response to questionnaires sent to 43,000 SMEs in 17 countries.
A separate survey published at the start of February and based on data from factoring and invoice discounting companies shows a similar pattern but worse figures. The Association of British Factors and Discounters report a European average of 81 days, with Britain at 75, Germany 65, France 90, Italy 104 and Sweden best at 40. Contact Ann Peters, Grant Thornton, on 0171 383 5100 and Elizabeth Ward, ABFD, on 0171 930 9112
LATE PAYMENT PENALTIES
The Labour leader, Tony Blair MP, launched a small business consultative document on March 20 with a promise of a statutory right to interest on late payments once contractual terms are breached. He also said large companies would be required to publish data on payment practices.
Meanwhile the DTI has published Late Payment – Help for Small Business, a best practice guide for use by trade associations and business support organisations in helping small companies. Four in ten firms do not have standard terms of trade and many do no credit checking. Contact Labour Party on 0171 701 1234 and DTI Small Firms Publications on 0171 510 0169
BUSINESS LINKS WORKING
An independent evaluation of people using the Business Link network shows that eight in ten firms have their needs met and half then took action to improve performance. Conducted by Ernst and Young and released by the DTI on February 28, the results are based on interviews with 30 firms and appear to show that Business Links are achieving their purpose of simplifying access to information and advice for small and medium sized businesses.
However a report by the Institute of Directors, published on February 26, warns that some Business Links fall short on quality and that plans for self-funding through charges are unrealistic. The IOD welcomes Business Link as eliminating wasteful duplication and says that nearly three quarters of its member directors surveyed for the study expressed interest in serving as board members.
Some 5,000 businesses contact their local Business Link each week, using the network of 74 partnerships now open with 204 outlets, covering 86% of VAT registered businesses. The last part of the network to be completed, in London, will be formally launched on May 1. Contact DTI Enquiries on 0171 215 5000 or Ruth Lea, IOD, on 0171 839 1233
SMALL IS SUCCESSFUL
Two small businesses have won £10,000 each from the first ever Business Links Making the Difference awards. Beating eight other finalists from four regional heats, the firms successfully improved their performance, products and services as a result of using Business Link personal business advisers. The new awards scheme is supported by Shell UK and the DTI. Contact Making the Difference Awards on 0191 261 5584
BUILDING BRIDGES
A pioneering small business support project from Belgium is being introduced to the UK through a pilot scheme in three Business Link areas, Hertford, Leicester and Hereford and Worcester. Business Bridge creates a peer-group support network, facilitated by managers from large companies, and is supported by Business in the Community and private sector partners Deloitte & Touche, Barclays Bank, Shell UK and NatWest. Successful at increasing turnover and jobs created, the scheme offers management development opportunities for managers in large firms, greater understanding of the supply chain and the chance to improve reputation as a responsible business. Contact Paul Scott, BITC, on 0171 224 1600
comment
Poor Michael Heseltine. The creator of Business Links lets slip that he got going in business by stringing along his creditors. He inadvertently underlined how much remains to be done even after 17 years of the enterprise party in power. However belatedly, it is surely good for government departments to sign up to the CBI code of good payment conduct.
Now Labour is trying to get in on the act, promising legislation. But will it work? Dominant purchasers who already pay late would simply force longer credit terms on smaller suppliers. Dominant suppliers could set short terms, demand interest and pursue through the courts any small purchasers who didn’t pay up.
The latter day converts to the power of government purchasing are moving in the direction of legislation too, but legislation to force disclosure of actual payment practice. (It was only a few months ago that the law changed to require disclosure of payment policy in annual reports.) But will this work on companies that don’t even aspire to be seen as responsible.
So what is to be done? The answer is to rely mainly on the power of publicity, but use light-touch legislation to do two things: first to create the climate of opinion and change expectations without which poor payers won’t become the pariahs of business; and second, by setting minimum standards, deter back-sliders and give small firms some protection against the absolute rogues. That’s what happened in Sweden, where payment times halved after simple effective legislation was introduced, with an enforcement mechanism which ensured lawyers were not the only ones to make a profit.
Corporate Citizenship Briefing, issue no: 27 – April, 1996
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