Businesses face new penalties for delaying payments to small commercial entities
UK Government Introduces Tough Measures to Combat Late Payments to Small Businesses
The UK government has unveiled a new plan aimed at combating late payments to small and medium-sized enterprises (SMEs), marking the toughest legislative reforms on late payments in 25 years. This initiative is part of a broader "Plan for Change" to unlock growth and support the 60% of the UK workforce employed by SMEs, which generate £2.8 trillion in turnover.
At the heart of the plan are measures designed to ensure timely payments for SMEs. The introduction of maximum payment terms will see a mandatory cap of 60 days, which will be reduced to 45 days to ensure businesses get paid on time. The Small Business Commissioner will be granted stronger powers, including the ability to conduct spot checks and impose multi-million-pound fines on large firms that persistently pay late.
To speed up dispute resolution between suppliers and buyers, a 30-day invoice verification period will be enforced. Corporate audit committees will also be legally required to scrutinise payment practices at board level, with mandatory interest charges for firms that pay late to increase compliance pressure.
Financial support is also a key part of the plan. A £4 billion finance boost includes 69,000 Start-Up Loans, providing financial backing to inspire new entrepreneurs and small business owners. The British Business Bank is set to receive more than £3bn for guarantee programs to increase support to small businesses. Additional funding for other initiatives will bring certainty to spending programs rolled out by the government.
The British Chambers of Commerce considers these measures a much-needed step forward in recognising and supporting SMEs. Tina McKenzie, policy chair of the Federation of Small Businesses, considers tackling late payments critical for boosting communities and the wider economy. British Business Bank chief executive Louis Taylor looks forward to supporting more SMEs and generating economic growth.
Other reforms include changes to licensing for the hospitality and arts sector to allow for growth in designated zones. The government's intention to lower business rates is specific to firms in the retail, hospitality, and leisure sectors. Keir Starmer, the Labour Party leader, has also vowed to crack down on delayed payments affecting small businesses.
The UK government's plan aims to offer more stability to entrepreneurs and firm owners, with the hope that these measures will help small businesses thrive and grow, reducing the estimated £11 billion annual cost to the UK economy caused by late payments.
[1] BBC News: UK Government Takes Action Against Late Payments to Small Businesses (link) [2] The Guardian: UK Government to Introduce Tougher Rules on Late Payments to Small Businesses (link) [3] The Telegraph: UK Government's Plan to Combat Late Payments to Small Businesses (link) [4] The Independent: UK Government's Plan to Tackle Late Payments to Small Businesses (link)
- Tina McKenzie, policy chair of the Federation of Small Businesses, believes addressing late payments is crucial for boosting communities and the wider economy, as these payments currently cost the UK economy an estimated £11 billion annually.
- The UK government's plan includes financial support to help small businesses thrive, such as a £4 billion finance boost including 69,000 Start-Up Loans and more than £3bn for guarantee programs through the British Business Bank.
- In addition to the measures targeting late payments, the government also plans to lower business rates for firms in the retail, hospitality, and leisure sectors, and make changes to licensing for the hospitality and arts sector to foster growth in designated zones.
