On October 5, former Conservative MP Paul Uppal was appointed as the United Kingdom’s first small business commissioner by business secretary Greg Clark. The announcement was received warmly by the Federation of Small Businesses (FSB) national chairman, Mike Cherry, who has worked with Greg Clark on the idea of this role for some time.
Uppal will lead an independent office tasked with empowering small firms in the UK. Their first and primary task will be to address the UK’s growing late payment epidemic and to help small businesses in disputes against larger firms. With over 20 years’ experience as a small business owner himself, the new small business commissioner has a wealth of personal experience that he hopes to apply in his new role to empower small businesses all over the country.
Making small businesses feel supported
According to Uppal himself, his top priority in his new post will be “ensuring small businesses feel supported,” and causing a “culture change in payment practices” in the UK. Small businesses are currently left largely at the mercy of much larger clients, who are quick to take advantage. FSB estimates that as many as 50,000 businesses fail every year as a direct result of the UK’s late payment practices.
Uppal aims to address this situation to ensure fair payment times for all businesses, and to create a healthier and more viable entrepreneurial environment. He sees small business as a vital part of the UK’s economy both now and in the future.
Late payments are at crisis levels in the UK
In tackling the late payment crisis, Uppal will have his work cut out for him. Estimates vary, but according to Zurich SME Risk Index, small businesses are currently owed more than a staggering £44 billion in late and missing payments. Nearly half of the UK’s 5.5 million small businesses report experiencing payment delays of more than three months, and nearly one in ten are owed more than £100,000.
In the current environment, larger businesses can easily force unfavourable or underhanded agreements on their suppliers. Worse, they can violate those contracts with near-impunity, since many of these small businesses are too financially vulnerable to allow any customer relationships to sour. That chronic vulnerability is reinforced by those same payment delays, resulting in a vicious cycle that often ends in bankruptcy for the small business.
Chasing down late payments eats up enormous amounts of time and money. Small business owners often don’t have the funds to hire accounting and legal support, meaning that they’re forced to take time away from their work to chase down clients and mitigate the resulting cash flow interruptions. To make ends meet, many businesses rely on overdrafts and pay their own employees and suppliers late, forcing them to additionally pay interest, and potentially destabilising their own business. Paul Uppal means to change all that.
What change might look like for UK small businesses
Uppal’s new office will not be in operation until the end of this year, at the very earliest. Precise plans on exactly how he plans to bring late payment times under control haven’t been laid, but a few general details have been released.
The new commissioner’s website will offer a variety of advice and information services to small businesses. It’s envisioned as a central hub that can help to guide small business owners to the existing support services and the information they need to resolve disputes and move forward on their own. Of course, Uppal’s ultimate task of addressing the results of the power imbalance between small businesses and their big business clients will be much larger than this.
Australia’s recent move to address the same issues, brought to light by the payment times inquiry launched by the ASBFEO earlier this year, offer a glimpse at a variety of possible solutions that Uppal may ultimately pursue.
Australia’s payment times inquiry report recommended a variety of legislative solutions, including industry codes that define best practices for business-to-business payments, ensuring the government and all government contractors make payment within 15 days, and requiring large businesses to publicly disclose all their payment times and practices.
Private sector self-regulation
With the intense public attention drawn to the issue by the payment times inquiry, Australian businesses felt compelled to act on their own accord as well. Earlier this year, the Business Council of Australia launched the Australian Supplier Payment Code as a voluntary measure where signatories pledge to pay invoices within 30 days, while also assisting smaller partners in implementing more efficient invoicing and payment management technologies.
The attention drawn to the issue by Uppal’s appointment will spark lively debate and may well begin to effect positive change even before official action is taken. Whether UK small businesses are offered solutions similar to these, or change ultimately comes in another form depends on the new small business commissioner, the government, and British businesses.