The Government has launched a new consultation that aims to protect small businesses with action on late payments. The Consultation launched aims to give Small Business Commissioner more power to support businesses and resolve late payment issues.

The proposed new powers include ordering businesses to pay in good time and issuing fines if they do not, ordering companies to share information on payment practices and the power to launch investigations. It is thought that £23.4 billion worth of late payments currently owed to small businesses in the UK, impacting cash flow and threatening the survival of small firms during the COVID-19 pandemic.

Small Business Minister Paul Scully announced the proposals look to give new powers to the Small Business Commissioner including:

  • the power to order companies to pay their partners, either as a lump sum or agreed payment plan, when a complaint against them for late payment has been investigated and upheld. Companies that do not do so could face further penalties, including fines. This will give a clear incentive for companies to pay their partners on time
  • the power to compel companies to share information during an investigation by the SBC. This will ensure cooperation with SBC investigations and provide more information about company payment practices
  • the power to launch investigations into suspected bad payment practice, without the need to have first received a complaint from a small business
  • expanding the scope for complaints to the SBC, to allow the Commissioner to investigate complaints about other businesses relating to payment matters in connection with the supply of goods and services
  • to review and report on wider business practices outside of payment matters, on instruction of the BEIS Secretary of State. This could be a practices unrelated to payment matters specifically impacting small businesses such as supply problems, or broader issues like barriers to the adoption of payment technology
  • the power to claim investigation costs from an investigated company when there are adverse findings against them

The government is seeking to create a culture of prompt payment in UK business. This is essential to enable small businesses to succeed, creating jobs, driving innovation and supporting their community.

Small Business Minister Paul Scully said “Late payments are a terrible burden for small businesses, not only disrupting their cash flow but posing a threat to their survival in many cases. We are committed to tackling this problem, supporting small businesses at this critical time for the British economy by helping them to secure payment on time.”

‘I am pleased to open this consultation on expanding the Commissioner’s powers and welcome the views of businesses that have been affected by this issue.”

Commenting on the consultation on new powers for the Small Business Commissioner, Director of Policy James Martin said “With firms continuing to face significant cash flow difficulties, and our research suggesting that late payment has increased during the pandemic, businesses will be encouraged by the government’s commitment to creating a culture of prompt payment. But the real test of any reforms will be whether anything changes for firms across the country struggling to manage their cashflow because of this issue.”

“Chambers of Commerce will continue their work with government and the Small Business Commissioner to find ways to tackle this burgeoning issue.”

National Chairman of the Federation of Small Businesses (FSB) Mike Cherry said “We know that paying small businesses late is debilitating, and the practice has increased during COVID-19. It deprives small firms of cashflow, holds back growth, undermines productivity and forces many to take out external finance. In thousands of cases a year this causes the closure of small businesses. It is therefore more important than ever to wipe out this poor payment scourge. The proposed new powers would give the Small Business Commissioner some teeth to investigate bad practice more easily and punish it more severely, and it is very welcome to see these plans being put forward for consultation.”

According to the Federation of Small Businesses (FSB), around 50,000 small companies close each year due to late payments. With many UK businesses continuing to struggle with the impact of coronavirus, this is now an especially urgent issue.

The Office of the Small Business Commissioner was established in 2017 by the previous government to address the issue of late payments. Since then, the SBC has claimed £7.5 million owed to small businesses and publicly named 8 companies for poor payment practice.