Small Business Minister aiming to end problem of late payments

Owner of a spice shop

The problem of late payments to small businesses is to be addressed by Small Business Minister Kelly Tolhurst.

Many small businesses either fail or struggle to survive due to late payments from larger companies who abuse their position in the market.

Now Mrs Tolhust is looking to tackle the problem and has announced new proposals which include:

  • the call for evidence to consider the best way company boards can put in place responsible payment practices throughout their supply chain, for example giving a non-executive director specific responsibilities for the company’s prompt payment performance
  • promoting innovative technologies, such as the latest accounting software, to help small firms manage their payments processes, and empowering trade bodies to highlight the best and worst practices in payment behaviour

Mrs Tolhurst said: “Our 5.7 million small businesses are the backbone of our economy, and ensuring we remain one of the best places in Europe to start and grow a small business is a key part of our modern Industrial Strategy.

“Today’s new call for evidence will help us identify the most effective way possible to tackle this issue once and for all and ensure small businesses are on a level playing field with their larger counterparts.

Federation of Small Businesses (FSB) National Chairman Mike Cherry said: “The voluntary Prompt Payment Code is not working when it allows signatories like Carillion to pay on terms of over 120 days, so we want to see a new tough and transparent compliance regime being proposed.”

The publication of the new call for evidence follows an announcement by the Business Secretary Greg Clark earlier this week where he set out other new measures to support small businesses, including:

  • the Small Business Commissioner to join the Prompt Payment Code’s Compliance Board to support his role in tackling late payment
  • the board to consider all complaints made about compliance as part of regular reviews, and report on all cases of signatories being removed from the code
  • further reform to the code to be considered including whether the Small Business Commissioner should have a greater role in its administration

The government has also set the ambition that all its departments commit to paying 90% of undisputed invoices from SMEs within 5 days and ensure all government departments have a dedicated non-executive director responsible for prompt payment, improving payment practices and exploring how better to use technology to make payment processes more efficient.

Some large businesses use late payments and extended payment terms to exert control over small businesses in their supply chain, and the government will now seek the views of the UK business community on how best to ensure small businesses are given a fair deal.

Cabinet Office Minister for Implementation Oliver Dowden said:  “Small firms can also report poor payment practices via our Mystery Shopper service, which ensures their voices are heard.

“We are listening to businesses and doing more than ever to level the playing field for small businesses to win work in the public sector.”

Emma Jones, MBE, founder of Enterprise Nation, said: “There is absolutely no doubt that late payment, often 60 days and even beyond, has a dramatic and disproportionate effect on smaller firms, which often rely on cashflow to fund trade and avoid unnecessary debt. The continued attention on the issue of late payment should enable UK enterprise to further flourish.

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The call for evidence opened at 09:30 on 4 October 2018, and closes on 29 November.

The call for evidence forms part of the government’s modern Industrial Strategy