Proposals to give people more time to pay their outstanding debts could prove disastrous for small businesses, according to a leading law firm in Shropshire.
Lawyers at Lanyon Bowdler Solicitors said small businesses would be hit by the new rules which propose doubling the length of time people have to respond to a debt claim.
The Government is currently considering proposals put forward by the Civil Procedure Rule Committee (CPRC), which makes rules of court for civil cases, the High Court and county courts.
Lisa Blair, head of the debt recovery unit at Lanyon Bowdler, said the plan to extend the period for people to respond to a debt claim from 14 to 28 days could have serious consequences for businesses.
She said: “The CPRC has admitted that creditors have already criticised the 28-day period and the Ministry of Justice has said that public funding cuts have led to ‘significant’ waiting times for appointments for advice.
“In other words, small businesses will have to wait longer for their money because the Government has scrapped legal aid for almost all debt advice, and central and local Government funding for advice agencies has been cut.”
The proposals were consulted on as part of a review into the Debt Pre-action Protocol by the CPRC, which sets out the process for how businesses can recover their debts through the civil courts.
Mrs Blair said: “We deal with both sides of the fence in terms of debt recovery – we have lawyers working on behalf of businesses trying to get their debts paid and we also work with those who are struggling to pay.
“We agree that the rules need to be updated to make the whole process smoother, but we have concerns with these proposals.
“We welcome the proposed introduction of a standardised form for debt claims but we are concerned at the plan to give debtors 28 days to return it.
“If there is a genuine need for advice which will take 28 days or longer then that is perfectly understandable, but our fear is that this will slow down payment for all other cases too.
“The reality is that if you give people 28 days to complete a form, the majority of people will take 28 days, and that’s a long time for a small business to wait.
“Cashflow is crucial to business survival, especially small businesses and start-ups, and a court-imposed extra 14-day delay could be very damaging.
“Recent statistics showed that 85 per cent of small businesses have experienced late payment in the past two years, and they are owed a staggering total of £30 billion in late payments.
“Anything that delays businesses receiving payments is a concern, so we would advise creditors to consider talking to their legal advisors sooner rather than later if they are having difficulties.”
