The UK government is taking decisive steps to tackle late payments by large firms to small businesses, a crucial move for small business support and growth.
- Research highlights that small businesses lose approximately £22,000 each year due to delayed payments by larger companies.
- The government has initiated consultations to formulate stringent laws, compelling transparency and accountability among large firms regarding payment practices.
- Past initiatives like the 2017 ‘duty to report’ law failed to significantly change large firms’ payment behaviors, necessitating new measures.
- Business leaders and government officials underscore the urgency of enforcing rules and penalizing non-compliance with new standards.
Delayed payments impose significant financial burdens on small businesses, costing them, on average, £22,000 annually. The UK government has recognized the critical nature of this issue and is moving to rectify it. Research from authoritative bodies like the Department for Business & Trade (DBT) and the Federation of Small Businesses provides evidence of these detrimental financial impacts, shedding light on the necessity for reform.
By initiating a consultation aimed at creating ‘tough’ new laws, the government aims to instill a culture of transparency and accountability among large firms. These new legal frameworks would require businesses to disclose payment data in their annual reports. Such measures are intended to facilitate increased scrutiny and ensure that fair payment practices are upheld.
Previous attempts to reform payment behavior, such as the 2017 ‘duty to report’ legislation, have yielded only slight improvements. According to the Chartered Institute of Procurement & Supply, compliance remains low, highlighting the need for more effective enforcement and stricter regulations.
Echoing the government’s commitment, Prime Minister Sir Keir Starmer stated, ‘Late payments cost businesses tens of thousands of pounds and are one of the biggest reasons for business failure.’ This initiative is pivotal to the government’s strategy for bolstering small business growth. Business Secretary Jonathan Reynolds also expressed this determination, depicting late payments as ‘simply unacceptable.’
Enhanced enforcement measures are integral to the government’s approach. Proposed reforms include potential criminal prosecution and unlimited fines for company directors who fail to adhere to reporting rules. The introduction of a new fair payment code will categorize firms into gold, silver, or bronze tiers, based on their payment practices.
The government’s pursuit of stringent measures signifies a substantial step toward supporting small businesses and fostering a fairer economic environment.
