The UK government is set to implement stringent measures to combat late payments by large corporations to small businesses.
- Research reveals that small businesses lose an average of £22,000 annually due to delayed payments, impacting their overall growth and stability.
- Proposed regulations will mandate large firms to disclose payment practices in annual reports to increase transparency and accountability.
- Past efforts to improve payment practices through legislation have achieved limited success, prompting the government to explore stricter enforcement.
- Criminal charges and fines loom for company directors who fail to comply with the new reporting standards, alongside the introduction of a fair payment code.
On average, delayed payments cost small businesses £22,000 annually, according to research from the Department for Business & Trade and the Federation of Small Businesses. These losses threaten the growth and stability of these smaller entities, highlighting the necessity for effective intervention.
The government plans to introduce new laws that will require larger companies to include detailed payment data in their annual reports. This obligatory reporting aims to foster greater transparency, allowing for a more thorough examination of large firms’ financial engagements with smaller suppliers.
Previous legislative attempts, such as the 2017 ‘duty to report’ initiative, have yielded minimal improvements in the payment behaviours of large corporations. The Chartered Institute of Procurement & Supply indicates widespread non-compliance, underscoring the need for more robust measures.
Prime Minister Sir Keir Starmer stated that addressing late payments is crucial to bolstering small business growth, emphasising the financial burdens these delays impose and their role in potential business failures. Business Secretary Jonathan Reynolds reiterated the sentiment, branding late payments as ‘simply unacceptable’ while advocating for greater accountability from larger firms.
The proposed legal framework aims to not only reform current practices but also to enhance penalties for non-compliance. Company directors who fail to adhere to the reporting obligations may face criminal prosecution and unlimited fines. Moreover, a new fair payment code will award businesses gold, silver, or bronze status based on their compliance and payment standards.
The government’s initiative marks a significant step towards fostering a more equitable business environment by holding large firms accountable for their payment practices.
