David Cameron to pledge crackdown on late payments that leave small firms on the brink of financial ruin Small businesses can run into severe problems as a result Some are unable to pay their staff on time if a debt is not settled Cameron to announce a consultation on how best to deal with the problem By Daniel Martin and Matt Chorley The move comes as legislation starts its progress through Parliament to cut National Insurance contributions for business by £2,000 a year. Some 85 per cent of small and medium-sized enterprises say they have had to grapple with late payment from contractors, often pushing them into severe cash-flow problems. Crackdown: David Cameron wants to make Britain the best place to do business, including getting paid on time In the worst cases, it is not possible for small firms to pay their staff on time. The Prime Minister will announce a consultation on tackling late payment and whether there is a case for further legislation or penalties. He said: "It's not right that suppliers are not getting paid on time for the work they do and the services they provide, and I know that late payment can have devastating effects on our small and medium-sized businesses. I am determined to make Britain the best place to start, grow and do business and to back people who want to work and hard and get on. The Government has already taken steps to help address this issue but I am clear that more needs to be done to build a business culture across all sectors of the economy that sees the fair, prompt and reliable payment of suppliers become a core corporate responsibility which is taken seriously at the most senior levels. The £2,000 tax cut, announced in the Budget, is intended to encourage small companies to take on extra staff. Mr Cameron is marking the introduction of the National Insurance Contributions Bill with a tour of small businesses in the east of England, insisting the Government is keen to do everything it can help to help firms succeed. The tax cut is due to be in place by April next year and the Government said 90 per cent of the benefit would be felt by firms with fewer than 50 employees. The Prime Minister said the Employment Allowance would save 1.25 million businesses £2,000 per year - and mean 450,000 of them will have their national insurance bills eliminated entirely. He said: 'An ambitious and thriving small business sector is vital for steering the economic recovery in the right direction and helping us to succeed in the global race. We are determined to do everything we can to ensure that our small firms can be successful and prosperous and people can fulfil their aspirations. 'Small firms don't have the same cash-flow buffer as a large business, so being paid on time can be the difference between being able to pay staff and not' Last week, we helped people get on the housing ladder and own shares. This week, we're helping small businesses start and expand. This Government is 100 per cent% backing people who work hard and want to get on in life and we're going to finish the job we started.' John Allan, chairman of the Federation of Small Businesses, said: "Late payment is an increasing issue for our members. Being paid late or given extended terms can severely hamper many small firms. They simply don't have the same cash-flow buffer as a large business, so being paid on time can be the difference between being able to pay staff and not. Katja Hall, chief policy director of the CBI, said: "Late payment is a serious issue for all businesses but particularly for smaller firms, as cash flow is their life blood."