The department for business, energy and industrial strategy (BEIS) is consulting on strategies to tackle late payments for goods or services to smaller companies by larger firms
Nearly a quarter of UK companies say that late payments are damaging their business and ministers say tackling them represents a huge opportunity for economic growth. Research from the Federation of Small Businesses (FSB) suggests it could add £2.5bn to the UK economy and keep an extra 50,000 businesses open each year.
The new proposals, include:
- a call for evidence to consider the best way company boards can put in place responsible payment practices throughout their supply chain, for example giving a non-executive director specific responsibilities for the company’s prompt payment performance; and
- promoting innovative technologies, such as the latest accounting software, to help small firms manage their payments processes, and empowering trade bodies to highlight the best and worst practices in payment behaviour.
‘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,’ said small business minister Kelly Tolhurst.
‘Over the past 5 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.
‘Today’s call for evidence will help us identify the most effective way possible to tackle this issue once and for all and ensure small businesses are on a level playing field with their larger counterparts.’
FSB national chairman Mike Cherry said current arrangements were not working and more needed to be done to ensure businesses were paid promptly.
‘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,’ he said.
‘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.’
He added that central government setting a good example by pledging to pay 90% of undisputed invoices from small and medium-sized businesses within five days.
Report by Rob Munro