Small businesses will be paid on time – that’s the clear message from the Government as it cracks down on late payments, with the largest set of reforms in over a generation.
The Small Business Commissioner will be given sweeping new powers to investigate poor payment practices, adjudicate payment disputes, and fine the worst offenders – with fines worth tens of millions for firms that persistently pay late or fail to comply with the new laws.
The measures will help to ease the cost of living for entrepreneurs and SME owners who are often forced to wait months – or even years – to receive money they have already earned and having to chase endlessly to receive it.
It’s a problem that’s currently costing the UK economy £11 billion every year. Some 38 businesses shut their doors every single day because they are not paid on time – the equivalent of 266 a week.
These new measures, which will be the toughest in the G7, build upon and strengthen legislation on late payments; they include a new 60-day cap on payment terms on all large firms when paying smaller suppliers. New mandatory interest on late payments will also be introduced, with a requirement for all commercial contracts to include statutory interest set at eight per cent above the Bank of England base rate.
Business Secretary, Peter Kyle, said: “Far too many businesses are forced to shut down because they have not been paid – that is simply unacceptable. We are unveiling the strongest, most robust changes to payment laws in over a generation – laws that will transform the fortunes of small businesses for years to come and make their day to day lives much easier.”
According to the Federation of Small Businesses, boards or audit committees of persistently late-paying large companies will be required to publish explanations for poor payment performance and the actions they are taking to address it.
Minister for Small Business and Economic Transformation, Blair McDougall, added: “I know first-hand how difficult late payments can be, forcing you to decide if you can afford to keep a business running, pay employees or even buy Christmas presents for your children.
“That is why I’m proud to be leading the charge on tackling a problem that has been left untouched for far too long. These are genuinely game-changing measures that will ensure no business, no employer, no family has to endure the immense strain of being left strapped for cash they have already learnt.”
These new measures follow the launch of the Small Business Plan by the Prime Minister last year, which in addition to laying out late payments plans, also launched the Business Growth Service, which is already transforming the Government support offer for small firms, and increased access to finance for SMEs and entrepreneurs with a massive £4 billion finance boost.
