A small business commissioner will help firms tackle the issue of the billions of pounds in late payments for goods and services, under government plans.
It estimates small firms are owed £26bn in late payments – and chasing debts costs them millions of pounds more.
Business minister Anna Soubry said the role would tackle the power “imbalance” between small and large UK businesses.
The Federation of Small Businesses welcomed the move but said it must be properly funded and be high profile.
Plans for a new small business conciliation service to help settle disputes – specifically over late payment – were announced in the Queen’s Speech.
The service aims to handle problems without the need for court action.
As part of the new Enterprise Bill, the government also wants to create a commissioner role to deal with outstanding payments and supply-chain bullying, where suppliers are forced to cut their prices in order to retain the custom of much bigger firms.
It said the commissioner would:
- Be a point of first contact for small businesses and provide advice and support on how to avoid disputes and how to resolve them
- Offer access to mediation services to sort out issues quickly and affordably, “at a fraction of the cost of going to court”
- Investigate complaints over unfair business practices and regularly report its findings
In a consultation published online, Ms Soubry said small firms were responsible for 48% of UK private sector employment and were vital to economic growth.
She said she wanted the commissioner to bring about a “long-lasting culture change”, helping to settle disputes quickly and cheaply.
A similar role in Australia was having a real impact, she said, adding she hoped for the same “effective and fair solution here”.
The consultation cited data suggesting more than half of cases handled by Victoria’s small business commissioner were successfully resolved, at 30% or less of the cost of taking legal action.
More than half of complaints were resolved within one week, and 80% within 12 weeks.
Ms Soubry said the culture of late payments to small firms was “simply unacceptable”.
“It limits their growth and productivity, and can put an otherwise successful business at risk,” she said.
“The small business commissioner will tackle the imbalance of bargaining power between small suppliers and large customers, and encourage them to get round the table.”
Ministers also called on businesses of all sizes to share their experiences with late payments and asked for their views on its proposals.
The Federation of Small Businesses, which represents small and medium-sized businesses and has more than 200,000 members, carried out a survey of members last year that suggested 51% had experienced late payment in the previous 12 months.
The federation said the move was encouraging but a culture of late payments had developed at board level in big companies.
It also said the new commissioner should have the power to refer large debtors to the Competition and Markets Authority.