The UK government is implementing measures to address late payments by large companies to small businesses, aiming to enhance transparency and accountability.
- Late payments cause significant financial strain, costing small enterprises an average of £22,000 annually.
- Proposed laws will make it mandatory for large companies to include payment data in their annual reports, ensuring greater scrutiny.
- Previous efforts, such as the ‘duty to report’ legislation, have had limited impact, highlighting widespread non-compliance.
- Company directors may face criminal charges and unlimited fines for not adhering to new reporting regulations.
The UK government is taking decisive action to tackle late payments by large firms to small businesses, introducing new measures to enhance transparency and accountability. This initiative addresses a pressing issue that imposes an average financial burden of £22,000 annually on small businesses, according to data from the Department for Business & Trade and the Federation of Small Businesses.
In response to this challenge, the government has launched a consultation to explore ‘tough’ new legislation. The proposed laws will require major companies to report their payment data within their annual reports, allowing for closer examination of their interactions with smaller suppliers. This move aims to address the shortcomings of previous initiatives, such as the 2017 ‘duty to report’ legislation, which saw only slight improvements in the payment practices of large firms over the last five years.
Highlighting the gravity of the situation, Prime Minister Sir Keir Starmer emphasised that eliminating late payments is crucial for fostering small business growth. ‘Late payments cost businesses tens of thousands of pounds and are one of the biggest reasons for business failure. We are finally bringing forward the measures that small businesses have been calling for,’ he asserted.
Business Secretary Jonathan Reynolds echoed these sentiments, condemning late payments as ‘simply unacceptable’ and stressing the necessity of holding larger firms accountable for their payment behaviour.
The government also intends to bolster enforcement against firms failing to comply with reporting obligations. Potential penalties for non-compliance include criminal prosecution and unlimited fines for company directors. Furthermore, a new fair payment code will be introduced, assigning businesses gold, silver, or bronze status based on their payment practices. This initiative underlines the government’s commitment to supporting small business sustainability and combating unfair payment practices.
The government’s bold measures signal a significant push towards supporting small business sustainability by targeting late payments from large corporations.
