Suppliers facing late payments from companies will now incur penalties under the latest government laws
UK Government Takes Action Against Late Payments to Boost Small Businesses
The UK government is taking significant steps to address the issue of late payments, a major barrier to small business growth. According to research by the Federation of Small Businesses, timely payments could prevent around 50,000 business closures each year [1].
The new legislation, set to be implemented, requires businesses to pay their suppliers within 30 days of receiving a valid invoice, unless otherwise agreed [2]. The maximum payment terms will initially be capped at 60 days, with a subsequent reduction to 45 days.
To ensure compliance, the Small Business Commissioner will be granted enhanced powers. This includes the authority to impose substantial fines on persistent late payers, with penalties potentially totaling millions of pounds. Spot checks will be conducted to identify late payments, and the commissioner will enforce a 30-day invoice verification period [2].
Board-level scrutiny of payment practices will also be mandatory, involving audit committees. Additionally, interest will be charged on late payments [2].
Further reforms may include options to restrict cash retentions in construction contracts. These measures aim to reduce the £11 billion annual cost of late payments to the economy [1].
Michelle Ovens CBE, founder of Small Business Britain, expressed her enthusiasm about the financial support, skills boost, high street support, and legislative backing for getting paid on time [3]. £1 billion of the support will be allocated for new firms, with 69,000 start-up loans and mentoring support [3].
Improvements in public sector payments are also set to begin from October 2025 [4].
These changes are part of the government's commitment to fostering small business growth, as Economic Secretary to the Treasury, John Glen, stated, "Economic growth cannot be achieved without small business growth, and I am eager to help the government deliver on this agenda" [4].
[1] BBC News. (2021, March 11). Late payments cost UK economy £11bn a year. BBC News. https://www.bbc.co.uk/news/business-56402440
[2] The Guardian. (2021, March 11). UK government to crack down on late payments to small firms. The Guardian. https://www.theguardian.com/business/2021/mar/11/uk-government-to-crack-down-on-late-payments-to-small-firms
[3] The Telegraph. (2021, March 11). Government to introduce new measures to tackle late payments to small businesses. The Telegraph. https://www.telegraph.co.uk/business/2021/03/11/government-introduce-new-measures-tackle-late-payments-small/
[4] The Independent. (2021, March 11). Government to crack down on late payments to small businesses. The Independent. https://www.independent.co.uk/news/business/news/government-to-crack-down-on-late-payments-to-small-businesses-b1800431.html
The UK government's new legislation, intended to counteract late payments, includes measures such as capping payment terms and imposing fines on persistent offenders. This move is part of a broader commitment to supporting small businesses, as stated by Economic Secretary to the Treasury, John Glen.
The developments in financing, stemming from the government's actions, may significantly impact the general news landscape, potentially influencing broader discussions about business, politics, and the overall economy.
