Views diverge on the need for legislation on payment times.
British business holds an unchallenged lead over its European rivals in one aspect of trade: the late payment of debts. According to recent research by Dun and Bradstreet, UK companies settle their debts 49 days, on average, after the agreed date. The French pay up 24 days late, the Germans 19. Smaller British firms 'wait an average of 83 days for payment from the date of invoice,' complains Derek Yarwood of the 22,500-member Forum of Private Business. 'At present there are an estimated £50 billion worth of unpaid commercial debts in this country, and £20 billion of it is overdue. It's a huge problem and it's getting worse.' 'The system is incredibly unfair,' agrees Colin New, professor of manufacturing strategy at Cranfield University. 'Large, usually public companies, which have access to the cheapest possible capital, transfer their debt burden on to small, usually private companies which have difficult access to the most expensive capital.' A fresh approach is required to solve the problem, says New, who favours a 'staggeringly simple' legislative solution. This would be to allow input VAT to be reclaimed or offset only on invoices paid within (say) 30 days of invoice date. An elegant, and intentional, feature of this proposal is that non-compliance would be an infringement of VAT legislation, and monitoring would be done through Customs and Excise. It would therefore not be necessary for a small supplier to confront a major customer.