
The Government has announced tougher measures to tackle the issue of late payments to small businesses. These new measures will be included in the upcoming Prompt Payment & Cash Flow Review, due to be published shortly and will improve delivery and enforcement of policies, enabling more small businesses to get paid on time.
Late payment of invoices and long payment terms are key issues that businesses, especially SMEs, highlight as a barrier to their growth. Owners and managers are forced to spend disproportionate time chasing payments; resulting cash flow problems cause even good, viable firms to struggle.
In 2022, Small and Medium-sized Enterprises (SMEs) were owed on average an estimated £22,000 in late payments. Improving payment culture in the UK will support smaller businesses, many of which do not have the resources to accommodate long or late payments from their business customers and could boost the economy by £2.5 billion annually.
New measures to be announced in the review will include:
The Government says the stronger measures will benefit UK businesses by fostering a stronger payment culture and providing businesses with more predictable and reliable cash flow, allowing businesses to spend and invest with greater certainty.
It will reduce the time spent by businesses chasing payments, freeing up more time for other activities that will help them to grow. Tackling late and long payments provides an opportunity to increase investment and productivity across the economy.
This will improve payment culture in the UK to support smaller businesses, many of whom do not have the resources to accommodate long or late payments from their business customers.
Secretary of State for Business and Trade Kemi Badenoch said “SMEs make up 99 per cent of firms in the UK and are the lifeblood of our economy. I know that late payments are a massive barrier to growth and I am determined to fix that.”
“The measures we’re announcing will take a big step towards making sure SMEs get their payments on time, helping firms to grow and prosper.”
Small Business Minister Kevin Hollinrake said “Small businesses form a crucial part of large companies’ supply chains. Without them, they couldn’t do business. It’s only right that they should be paid promptly for their services. SMEs that are paid on time can do more business, scale up and make more profits, delivering growth for the economy.”
Responding to the Government’s announcement at the Conservative Party Conference of its plans to tackle late payment, Martin McTague, National Chair of the Federation of Small Businesses (FSB) said “Today’s announcements mark the next step to tackling late payments, but we hope it’s the prelude to more fundamental reform to come.|
“The prize to get this right is clear – adding £2.5 billion to the economy, and saving 50,000 small businesses each year that otherwise would not survive. At a time when our community has contracted by 10%, and with high inflation aggravating cashflow problems, we believe that bigger changes will be needed around Audit Committees and looking to other countries’ approach to mandating 30-day business-to-business payments, and so FSB will be focused on these for the party manifestos for next year’s election.”
“Every political party should look at their small business offer to attract the votes of 5.5 million engaged and motivated small business owners. Fundamental reform most often happens shortly after an election, when manifesto promises are put into effect, a pattern we have seen play out in the past.”
“In the meantime, proposals to improve data gathering and to toughen the Prompt Payment Code are welcome. Proposed increased powers for the Small Business Commissioner will only be a reality if they are within legislation in the King’s Speech next month, but in reality all eyes on this now shift to the next election.”