The UK government introduces new measures aimed at combating late payments by large firms to small businesses, enhancing transparency and enforcing accountability.
- Research from the Department for Business & Trade (DBT) and the Federation of Small Businesses shows that delayed payments cost small businesses £22,000 annually.
- A consultation to explore strict new laws designed to make larger companies accountable for late payments has been launched, aiming for greater transparency.
- Proposed rules will require large firms to include payment data in their annual reports, allowing closer scrutiny by smaller suppliers.
- Government officials stress the importance of supporting small businesses by eliminating late payments as part of a broader strategy for economic growth.
Research from the Department for Business & Trade (DBT) and the Federation of Small Businesses reveals that delayed payments cost small businesses £22,000 annually. This significant financial burden underscores the need for regulatory intervention.
A new consultation has been launched to explore ‘tough’ new laws aimed at holding larger companies accountable for late payments and mandating greater transparency in their payment practices. The government hopes this will shift the current landscape, which disproportionately disadvantages small businesses.
Under the proposed new rules, large firms will be required to include detailed payment data in their annual reports. This measure is designed to enable closer scrutiny of their payment practices and dealings with smaller suppliers. Past efforts, such as the ‘duty to report’ legislation introduced in 2017, have had limited success, necessitating this more stringent approach.
Research by the Chartered Institute of Procurement & Supply indicates only a slight improvement in payment behaviour by large companies over the past five years, highlighting widespread non-compliance. This persistent issue has prompted strong responses from government officials.
Prime Minister Sir Keir Starmer has stated, ‘Late payments cost businesses tens of thousands of pounds and are one of the biggest reasons for business failure. We are finally bringing forward the measures that small businesses have been calling for.’ Business Secretary Jonathan Reynolds echoed this sentiment, labelling late payments as ‘simply unacceptable’ and emphasising the necessity of holding larger firms accountable for their payment practices.
The government’s strategy also includes enhanced enforcement efforts against large firms failing to report their payment performance as required. The new legal framework will impose severe penalties, including criminal prosecution and unlimited fines for non-compliant company directors.
Additionally, the introduction of a fair payment code will categorise businesses into gold, silver, or bronze status based on their adherence to payment standards, aiming to incentivise better practices.
The UK government’s initiatives are poised to create a more equitable environment for small businesses by holding large firms accountable for their payment practices.
