Fines worth potentially millions of pounds could be dished out following the new laws
Prime Minister Sir Keir Starmer has announced new legislation set to be the “toughest laws in the G7” aimed at helping prevent small businesses from going under due to late payments. The crackdown will see larger companies heavily penalised for persistently paying suppliers and other small businesses they work with late.
It’s hoped the reforms will free up the countless hours small businesses currently spend chasing overdue invoices. It will also take away the financial uncertainty of late payments, providing better cashflow and allowing owners and entrepreneurs to focus on growing their businesses instead.
The Prime Minister 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.
“Through our Small Business Plan, we’re not only tackling the scourge of late payments once and for all, but we’re giving small business owners the backing and stability they need for their business to thrive, driving growth across the country through our Plan for Change.”
Among the proposed changes is a new maximum payment term of 60 days, reducing to 45 days, to assure companies they’ll be paid on time.
The Small Business Commissioner will be also able to present fines worth potential millions to the biggest firms consistently paying suppliers late.
The commissioner will also be given the power to carry out spot checks and enforce a 30-day verification period to speed up resolutions to disputes. Audit committees will be legally required to scrutinise payment practices at a board level.
It’s hoped this will put pressure on the biggest companies to prove they are treating even their smallest suppliers fairly. Mandatory interest charges for late payments will back up these proposed changes.
This reform comes after government data found late payments force 38 businesses to shut down every day, costing the UK economy £11 billion.
Pressure is also growing for the government to better support businesses following April’s National Insurance hikes and minimum wage increases.
Business and trade secretary Jonathan Reynolds said: “This country is home to some of the brightest entrepreneurs and innovative businesses in the world, and we want to unleash their full potential by giving them back time and money to do what they do best – growing our local economies.
“Our Small Business plan, the first in over a decade, is slashing unnecessary admin costs, making it easier for businesses to set up shop and giving SMEs the financial backing they need.
“This is our Plan for Change in action, putting more money in people’s pockets, boosting local communities and ensuring Britain is a great place to do business and thrive.”
