Business organisations have given evidence at a parliamentary inquiry into the practice of late payment and its impact on UK SMEs.
Chaired by labour MP Debbie Abrahams, a cross-party panel of MPs heard from business leaders who accused late payers of "playing" with SMEs with one saying "they hung me out to dry".
Another witness, representing the construction industry, said that many sub-contractors were so cash-starved as a result of late payments that they were cutting corners and creating a legacy of "sick buildings" that would "result in the deaths of people".
As part of the inquiry four panels representing business groups, FTSE listed businesses, suppliers and business and economics analysts, gave evidence for around 40 minutes each to inform an assessment of the impact of late payment on SMEs as well as the wider UK economy.
The inquiry also sought to examine the effectiveness of guidance and initiatives such as the government's Prompt Payment Code (PCC), a voluntary scheme that encourages signatories to pay suppliers on time.
Abrahams said the standard of testimony had been excellent. She added: "Credit should also go to the SME owners who were brave enough to talk publicly about the problems they have encountered.
"We owe it to our SMEs and entrepreneurs to treat them fairly. We can’t, on the one hand, say it’s them who’ll get us out of this recession but then, on the other hand, stand by and do nothing to protect them from larger, more powerful companies who misuse their power."
She commented that although particularly disturbing evidence had been submitted by the construction industry, all business sectors were being affected.
The latest Bacs figures show that more than £30.2bn is currently owed in late payments to around one million SMEs, among them many print and print-related businesses.
The BPIF Printing Outlook survey, published in January, revealed that printers ranked late payments as a major business concern, second only to access to finance.
The survey showed that 24% of respondents had seen a deterioration in their payment terms compared to the previous quarter while 68% said there had been no improvement. Around two thirds said they had been forced to accept extended terms with 25% of those being 120 days.
Meanwhile only 7% reported any improvement despite campaigns such as Abrahams’ 'Be fair – Pay on Time’ initiative launched in 2011, as well lobbying by business organisations such as the Federation of Small Businesses and the Forum of Private Business (FPB), calling for more stringent monitoring and enforcing of the PPC.
FPB head of policy Alexander Jackman was among business organisation representatives that gave evidence at the inquiry.
He said: "Late payment is having a significant impact on business development, productivity and growth. Research has suggested 35% of small businesses have seen a reduction in profit and 16% have seen a noticeable reduction in turnover as a response to late payment or bad debts.
"Late payments are also having a knock-on effect, leaving many SMEs in a vicious circle of in turn paying their suppliers late. It starts at the top and tends to wash down the entire supply chain.
"A cultural attitude of late payment has developed in the UK. We need to reverse it quickly before more small businesses go under."
Recommendations to address the issues highlighted at the inquiry are scheduled to be published in the summer.