UK Government pledges “more timely payments” for small businesses

Proposed measures to end the problem of late payments to small businesses by large companies which “abuse their position in the market” have been put forward by small business minister Kelly Tolhurst.

Nearly a quarter of UK businesses report that late payments are a threat to their survival, according to the government. Tackling the problem could add £2.5bn to the UK economy and keep an extra 50,000 businesses open each year, according to research from the Federation of Small Businesses (FSB).
Among the proposals is a call for evidence on whether boards can put in place responsible payment practices throughout their supply chain, for example by giving a non-executive director specific responsibilities for the company’s prompt payment performance.

Another measure put forward includes empowering trade bodies to highlight the best and worst practices in payment behaviour in order to deliver practical improvements. The government is also promoting innovative technologies, “such as the latest accounting software”, to help small firms manage their payments processes.

Tolhurst said: “Our 5.7 million small businesses are the backbone of our economy, and ensuring we remain one of the best places in Europe to start and grow a small business is a key part of our modern Industrial Strategy.

Over the past five years, the amount owed to businesses in late payments has halved, but we will go further to make sure all of our small businesses are treated fairly.

The call for evidence follows an announcement by the business secretary Greg Clark earlier this week where he set out other measures to support small businesses.

Among the measures put forward by Clark was that the small business commissioner, Paul Uppal, join the Prompt Payment Code’s compliance board to support his role in tackling late payment.

It also set out that the board would consider all complaints made about compliance as part of regular reviews, and report on all cases of signatories being removed from the code. Further reform to the code will also be considered including whether the small business commissioner should have a greater role in its administration.

FSB national chairman Mike Cherry said: “Late payment is the biggest challenge affecting small businesses and it is good to see the government getting serious about this issue, especially when it comes to large firms paying their supply chains promptly.

The voluntary Prompt Payment Code is not working when it allows signatories like Carillion to pay on terms of over 120 days, so we want to see a new tough and transparent compliance regime being proposed.

Involving the small business commissioner Paul Uppal with the code is also right as it shows a more joined-up approach to this difficult issue. Further, it is a positive step that central government will set an example – paying 90 percent of undisputed invoices from small and medium-sized businesses within five days.”

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