ACTION AT LAST ON LATE PAYMENTS
The message from the government as it unveiled its plan to support small and medium sized firms (SMEs) across the country was clear. ‘It’s time to pay up’.
The most significant measures contained within the Small Business Plan, announced in late July, centre on tackling the scourge of late payments with what are described as “the most significant legislative reforms in 25 years”.
The need for action is clear. Late payments are costing the UK economy £11bn a year and lead to the closure of 38 businesses every day, according to government figures.
New laws are set to give stronger powers to the Small Business Commissioner to empower them to wield fines, worth potentially millions of pounds, against the biggest firms who persistently choose to pay their suppliers late.
The commissioner will be given powers to carry out spot checks and enforce a 30- day invoice verification period to speed up resolutions to disputes.
The upcoming legislation will also introduce maximum payment terms of 60 days, reducing
“Through our Small Business Plan, we’re not only tackling the scourge of late payments once and for all, but we’re giving small business owners the backing and stability they need for their business to thrive, driving growth across the country through our Plan for Change.”
Business leaders have welcomed the move. Tina McKenzie, policy chair of the Blackpool-headquartered Federation of Small Businesses (FSB), said: “Making sure businesses are paid on time, that our high streets thrive, and creating conditions in which everyone can start and succeed in business are crucial priorities for small businesses, communities and the economy.
“The plan is an encouraging commitment from the government to take the side of small businesses in the great growth challenge ahead.”
Stephen Phipson, chief executive at Make UK, added: “Manufacturers across the country will welcome the government’s decisive action to tackle late payments.
“For too long, delayed invoices have drained cashflow, delayed innovation, and damaged
The plan is an encouraging commitment from
the government to take the side of small businesses in the great growth challenge ahead
to 45 days, giving firms certainty they’ll be paid on time.
Under the proposals, audit committees will also be legally required to scrutinise payment practices at board level, placing greater pressure on large firms to show they’re treating small suppliers fairly backed by mandatory interest charges for those who pay late.
Prime Minister Keir Starmer said: “From builders and electricians to freelance designers and manufacturers – too many hardworking people are being forced to spend precious hours chasing payments instead of doing what they do best – growing their businesses.
“It’s unfair, it’s exhausting, and it’s holding Britain back. So, our message is clear: it’s time to pay up.
businesses, particularly the thousands of small and medium-sized firms for whom late payments are one of the most consistent challenges to their survival and success.”
As part of the overall plan, the government is also looking to tackle another major barrier for small businesses – access to finance.
It is launching a new £4bn wave of financial support aimed at boosting growth and supporting more small businesses to start up and grow.
This includes a £1bn boost for new businesses, with 69,000 Start-Up Loans and mentoring support to inspire the next generation of entrepreneurs and small business owners.
Accelerating SME growth by just one percentage point per year, could deliver £320bn to the UK economy by 2030.
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