Letter: Measures to end late payments

Sir: Your Commentary (6 August) claims that 'the big business-oriented CBI has missed the main point' with regard to late payment of trade debts. The CBI represents some 250,000 businesses, more than 90 per cent of which are smaller firms. We fully recognise that small companies suffer particularly severe problems as a result of late payment, and have therefore consistently taken a lead from our Smaller Firms Council on this issue.

Examination of court procedures for debt recovery is just one way in which the CBI has sought to tackle the problem. CBI initiatives to promote prompt payment among UK businesses have included the launch this year of a Code of Practice, setting out the principles a responsible company should follow in its payment policy. More than 400 organisations have pledged support for the code so far, including a number of large companies.

The CBI and several other small-business organisations have considered the possibility of legislation for a statutory right to interest on overdue debts and have rejected this as unworkable. Any supplier currently has the right to include interest in its terms of trade. Indeed, courts may award interest even if it is not a condition of contract. If a small supplier is unprepared to risk upsetting a large customer by adding interest to an overdue bill, no amount of legislation can change that. It is unlikely that large suppliers will be similarly reluctant to charge interest to their smaller customers. The result: small businesses would be even more financially squeezed than they are now.

Yours faithfully,

RICHARD BRUCCIANI

Chairman

CBI Smaller Firms Council

London, WC1