Cheques - not so dead after all?

Last year, it was announced with much fanfare that cheques were to be scrapped. The UK Payments Council, which is responsible for setting strategy on payment methods in the UK, said it hoped that cheques could be phased out by 2018.

Last week, though, it seemed that cheques may have received a stay of execution when it was announced that an inquiry into their scrapping was to be reopened. So what does this mean for small businesses?

What is the background?

In 2009, the UK Payments Council announced its intention to phase out the use of cheques. It said that this process would be completed by 2018, and at this time cheques would no longer be processed – provided that viable alternatives could be found.

The announcement followed research that showed a dramatic decline in the use of cheques. According to the Payments Council’s figures, the number of cheques written has fallen by more than a half in two decades, from 11 million in 1990 to less than 4 million in 2009.

In response, the Treasury Committee opened an inquiry into cheque usage. The Committee began looking at the issue in February 2010, and eventually said that it had significant doubts about the Payments Council’s findings. It said that it was “unconvinced by the Payments Council’s argument that cheques were in ‘terminal decline’”.

What has happened now?

The inquiry has now been reopened, following a significant groundswell of public support for cheques. The Treasury Committee said that it had been “inundated” with letters from members of the public, as well as representations from small businesses and charities, insisting that cheques were still necessary.

There are a few reasons for this. Charity Age Concern UK has been amongst the most vocal supporters of cheques, saying that many older people continue to rely on them as a payment method.

Additionally, many small businesses have said that they still need cheques to help them take payments. Tradesmen have said that they would be particularly badly hit, with many unwilling or unable to bear the cost of taking chip and pin machines around to customers’ premises.

So cheques aren’t going to be scrapped?

Not necessarily. The Treasury Committee is again seeking representations from people or organisations that would be affected by the proposed abolition.

The inquiry is particularly concerned by the cost-benefit analysis that the Payments Council carried out, and the apparent lack of genuinely viable alternatives. It will be investigating new figures presented to it by the Council, and will consider whether or not it is convinced that cheques really do need to be scrapped.

What can I do?

The Treasury Committee is inviting responses from anyone with a strong feeling about the abolition of cheques. Given that small business owners are likely to be particularly badly affected by the plans, you may well want to make your voice heard.

You can submit written evidence to the Committee by email or by post. Evidence must be sent by midday on Friday 6 May 2011. Click here for information on how to submit.