Failed Bad Debt Legislation is "Green Light" for More Government Red Tape

Failed Bad Debt Legislation is "Green Light" for More Government Red Tape

According to the latest figures from the DTI the introduction of the Government's late payment legislation in 1998 has failed to protect UK companies from bankruptcy. DTI figures show that over 10,000 UK companies are still declaring themselves bankrupt every year because of bad debt. At the same time, research from checkSURE, the online credit checking agency, has shown that companies are not proactively managing their exposure to bad debt.

Gary Ling, CEO of checkSURE, commented: "The legislation is failing because it doesn't address the problem of bad debt itself. Rather, it attempts to alleviate the symptoms once bad debt has become a problem. What businesses really need is affordable, accurate, accessible credit checks on trading partners so they can avoid exposing themselves to bad debt in the first place."

According to checkSURE's research, 47 per cent of companies think that Government legislation would help them to manage debt more effectively. At the same time, only 15 per cent of firms surveyed ever commission detailed financial reports on a companies being considered for credit. DTI figures indicate that at any one time, small and medium-sized businesses in the UK are owed a staggering £6.8 billion in late payments.

Gary Ling: "Companies are failing to manage their own debt and are instead relying on legislation. This can only be of limited effect on its own, and will probably be against their best interests in the long run. The business community's continuing desire for Government legislation to protect themselves from each other is a green light for governments of all political colours to introduce more red-tape and regulation in the future. In any event, having asked for protection from themselves businesses will find it harder to make the case against future government interference. This legislation, which brings few real benefits, has this very real cost attached. Businesses have to reduce their dependence on Government by taking responsibility for their own affairs through the use of credit management tools, such as checkSURE, to reduce their exposure to bad debt."

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