There is one thing the next government can do to help every business in the UK, and it won’t cost a penny.

There is one thing the next government can do to help every business in the UK, and it won’t cost a penny.

Late payment is still the scourge of thousands of businesses. There’s a deeply-rooted culture of it here in the UK, as in many other countries, and recent EU-driven legislation doesn’t work because businesses are too frightened to use the powers granted to them by law against their clients.

Though there are big-name culprits I could point to, from government departments to supermarkets, it’s not simply a question of victims and villains. After all, if you’re waiting for a payment you’re more likely to delay payment to your own suppliers, and so the vicious circle goes on.

We need to create a virtuous circle of prompt payment, and it is quite easily done. Look what happens in Sweden and Denmark, where they have had late payment legislation in place since the 1970s. Debtors are obliged to pay interest on overdue sums at a rate set by the government, which is fixed to be significantly higher than the bank rate. That way, it doesn’t make sense to borrow money from your suppliers, which is what late payers are effectively doing.

All the evidence is that introducing statutory interest on overdue payments would be hugely popular with businesses. A recent poll conducted by online business directory FreeIndex finds that a commitment to outlaw late payment would swing the votes of 50 per cent of companies. That’s compared to 19 per cent who want the next government to make it easier to borrow money.

While companies may be forced out of business by falling demand or stronger competition, late payment is an entirely avoidable cause of hundreds of bankruptcies every year. Whatever the political colours of the next government, it should call an end to this national scandal.