Small firms are afraid to charge interest on overdue bills in case their actions prompt reprisals.

Legislation designed to make it easy for small firms to claim interest was introduced last year but it has failed to help them.

The Sussex branch of the Association of Chartered Certified Accountants said 10,000 businesses a year collapsed because they did not use the legislation.

Worthing-based credit management consultant Derek Scott says the new laws made no difference because small firms fear bullying and reprisals if they assert their new rights against large customers.

He said: "Legislation has made no progress and is going nowhere.

"Some of the organisations that lobbied hard for the changes had little understanding of how it would affect small firms.

"Very few people outside the credit profession understand what the real problem is. They are clinging to the belief legislation and shame lists will change the situation."

The number of small businesses in the UK exceeds 2.5 million, the majority are one-person operations and, according to Mr Scott, most are unwilling to risk losing business if they started to charge interest.

"The bigger firms have the trump card. If a small supplier dares to charge interest on overdue bills, they can take their business elsewhere. In 12 years of dealing with small business problems for enterprise centres in London and Sussex I have never met anyone who wanted the Government to introduce the legislation, apart from those who hoped to obtain business from it.

"Proper planning and credit control are the best way of dealing with late payment. No client I have ever dealt with planned a credit control strategy before starting their business and 90 per cent only showed an interest when their first problem arose.

"A professional credit controller would have more chance of getting firms to settle their accounts on time and do less damage than the new legislation."