A LOOPHOLE in late payment legislation could hit East Lancashire's small firms.

Accountant John Anderson of Freeman Rich in Blackburn warned that although a new law to protect companies from firms which leave them waiting for money owed was due to come into force it may not help many firms.

The new law only applies to contracts agreed on or after November 1, 1998.

"At this stage we have no clear idea how many smaller local businesses - who should be helped by the new Act - are likely to have entered into agreement before November which may now put them at a disadvantage," said Mr Anderson.

"What is evident is that the Government's aim of bringing about change in the culture of payment is a long way from being achieved."

The new law allows firms to charge interest at eight per cent over base rate on bills unpaid after 30 days.

But Mr Anderson warned that many firms may be reluctant to charge customers for fear of losing business.

"Alienating customers who are able to pay - albeit late - is a luxury most local businesses will feel they cannot afford, particularly given the current economic situation."

A recent survey suggested that 24 per cent of firms did not intend to charge interest on late debt and fewer than one in five said they would always claim interest.

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