The government has promised to crack down on late payments to small businesses, with prime minister Sir Keir Starmer warning repeat offenders “it’s time to pay up”.
The government claims that its newly released Small Business Plan represents the “toughest late payment laws in the G7”.
The plan is part of its reformed support package for SMEs and the Labour government’s wider aim to boost the UK economy amidst flagging growth and cost of living worries.
SMEs employ 60% of the UK’s workforce. However, many firms and trade associations have complained of issues related to persistent late payment by larger companies.
More powers
The new plans give the Small Business Commissioner more powers to fine large firms who persistently pay new businesses late, including the ability to carry out spot checks and enforce 30-day invoice verification periods.
Larger businesses will have new responsibilities at board level to ensure that they are treating small suppliers fairly. Audit committees are now required to scrutinise payment practices at board level.
The government claims that late payments cost the UK £11bn per year, closing down 38 firms every day.
‘Time to pay up’
Prime minister, Sir Keir Starmer, said:
“From builders and electricians to freelance designers and manufacturers, too many hardworking people are being forced to spend precious hours chasing payments instead of doing what they do best – growing their businesses.
“It’s unfair, it’s exhausting and it’s holding Britain back. So, our message is clear: it’s time to pay up.”
Ministers had previously promised to take action against late payment last year.
Consultation launched
The plans are part of the Small Business Plan, due to be published later this morning. A public consultation has been launched on the proposals.
Business and trade secretary Jonathan Reynolds said that the Small Business Plan would “slash unnecessary admin costs, making it easier for businesses to set up shop and giving SMEs the financial backing they need”.
Small business minister Gareth Thomas said that he had heard “all too often about businesses who just don’t have the cash needed to start up or grow”.
“Today, we’ve announced measures as part of our Plan for Change to tackle all of those issues and beyond.”
