The rise in interest rates will give SMEs extra leverage to chase late payments from big firms up the supply chain, a trade body has claimed.
The National Federation of Builders, which represents small to medium-sized builders, contractors and housebuilders, said the Bank of England’s move today to raise the base rate to 0.5 per cent would aid SMEs in chasing delayed payments.
Under The Late Payment of Commercial Debts Regulations of 2013, companies that are owed payments are permitted to charge interest at 8 per cent of the debt plus the Bank of England’s base rate.
“The interest rate rise will give SMEs more leverage when chasing late payments, but there is still some way to go,” said NFB chief executive Richard Beresford.
A report published in August revealed that nearly two-thirds of SMEs are not being paid for public sector work within the required 30 days.
Mr Beresford added: “Construction continues to have the worst payment record of any industrial sector, with SMEs owed more than £30bn in unpaid invoices.
“This is an opportunity for SMEs to test the small business commissioner who can deal with late payment claims, confidentially if required.”
The rate rise is also expected to mean around four million households will face higher mortgage interest payments.
However, housebuilders appeared unperturbed by the news.
Barratt Developments head of mortgages Adrian MacDiarmid said: “Just because there has been a small rate rise, that shouldn’t put people off buying a home.
“Over the last four years interest rates for a typical 85 per cent mortgage have dropped by two whole percentage points, so even if they now go up a little bit, historically they are still very low.”
Bank of England governor Mark Carney said there could be two further interest rate increases over the next three years, which would take the rate to 1 per cent.