As the economic downturn intensifies, small business groups are urging the government to do more to put a stop to late payments - a problem keenly felt by many bakeries.

Earlier this month, the government introduced an emergency package of measures to support small businesses, including a pledge that public bodies would pay suppliers within 10 days.

However, more needs to be done, according to the Federation of Small Businesses (FSB), which has called for firms that fail to pay their suppliers on time to be ’named, shamed and fined’ by the government. "During an economic downturn, combined with current illiquidity, late payment will lead to business closures and job losses. It affects us all. Late payment costs jobs," said the FSB.

Gill Brooks-Lonican, chief executive of the National Association of Master Bakers (NA), said late payments were on the rise across the craft sector as businesses felt the credit crunch. Her husband’s craft bakery business, Lonican’s, has seen increasingly late payments, particularly from cafés and sandwich bars. "It has got worse in the past three months, with people running up debts they shouldn’t. They forget that we have to pay our suppliers as well. Around 5% of customers owe substantial amounts."

The supermarkets are also guilty of increasingly late payments. One supplier told British Baker that over the past 18 months the multiples were breaking 30-day payment terms by an average of two weeks.

"Our largest customer told us recently that it would be taking an extra 15 days to pay invoices (from 30 to 45 days). This means we have to find another £150,000 to fund cashflow or pay our suppliers late," said the source.

In the Forum of Private Business’s latest quarterly survey of members, almost one in three respondents (31%) said they consider late payment to be a "significant" barrier to the growth of their businesses.