By Daniel Hunter

Leading business lawyers have said new Government proposals which would see a levy imposed on companies which fail to pay suppliers promptly could prove to be a vital step towards building momentum in the economy.

Business secretary Vince Cable has reportedly commenced a review into the feasibility of such plans, which are based on a system used in Sweden and would see companies fined for late payments.

According to the Financial Times, the plans have come as research by payments body Bacs revealed that small businesses were owed on average £31,000 in overdue payments in April. It is hoped that suppliers would be paid within 30 days, although a current voluntary code sets a limit at 60.

However, there are concerns that more needs to be done on the issue as only a handful of companies have signed up to the voluntary code.

Steven Beahan, a Partner and specialist in SME legal issues at Irwin Mitchell, said the move could be an important step in the right direction for business.

“The economy has shown some signs of improvement in recent months and it is very important these are built upon in the coming months. A late payment levy could play a vital role in that which will ensure fair treatment of suppliers and also the creation of a healthy business environment and attitude across the UK," he said.

“Late payments can be an incredibly difficult issue for SMEs, as cashflow can be particularly key for growing businesses which are reliant on prompt payment to continue with their plans for growth and stability.

“Problems with receiving such funds can only serve to put businesses in a difficult position, often leaving them facing tough decisions on the recovery of debts.

“Huge growth potential exists within the UK’s diverse and exciting community of small businesses and everything possible needs to be done to help such companies to achieve their potential. We are committed to businesses getting the support they need and this would be an important step in the future.”

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