Late payment a problem, VAT cut of little help, say businesses

1 June 2009

A new survey has revealed that for many firms delays in invoice settlement are on the increase, while the reduction of the VAT rate has not been effective in tackling the downturn in business.

The British Chambers of Commerce's latest monthly business survey, which took in 430 firms of varying sizes across the country, identified late payment times as a growing problem.

A half of respondents said that they have been waiting longer for bills to be settled compared with three months ago.

Only 11.4 per cent reported that the VAT cut had benefited their businesses; 76.6 per cent said that it had had no impact; and 12.1 per cent put it down as a burden.

Jobs still appear to be at a premium. Some 30.9 per cent of firms will attempt to recruit in the next 3 months, but 69.1 per cent will not be taking on new staff.

For government measures introduced to help combat the recession, support seemed muted.

Asked which initiatives were most likely to be of benefit during the downturn, 16.5 per cent chose the extension of HMRC's business support scheme; 8.1 per cent went for the extension to loss carry back; 8.8 per cent opted for the first-year capital allowances; 6.5 per cent ticked the spreading of business rate payments; 2.3 per cent selected the trade credit insurance scheme; and 57.1 per cent responded with none of them.

On business regulation, seven out of ten firms said they were spending up to five hours a week complying with employment law, with one in ten claiming they devoted more than 20 hours a week.

There were, however, signs that business confidence is beginning to rise once more.

Turnover forecasts for the next three months all improved compared with the figures for three months ago. Almost 30 per cent of businesses expected turnover to improve by a margin of 0-25 per cent, up from the 22 per cent that estimated a similar rate of growth back in January.

Commenting on the findings, the BCC's director general, David Frost said: "These results show just how tough cash flow conditions are, with half of businesses hamstrung by increasingly late payments. The knock-on effect is that under a third of employers are planning to recruit over the next three months.

"More needs to be done to improve company cash flow and prevent the steady rise in unemployment. Announcing a moratorium on new employment law and scrapping the planned rise in national insurance would certainly send a signal that the government is serious about supporting jobs."