The Government has announced plans to strengthen the UK’s Prompt Payment Code which is still failing to protect small businesses from receiving late payments.
Business Secretary, Greg Clark, confirmed a package of measures that would tackle once and for all the “unfair treatment of small businesses by companies who abuse their position by paying late for products and services”.
Mr Clark has promised the small business community a “touch and transparent compliance regime”. The Government will also be consulting on the best way to ensure company boards maintain responsible payment practices across their entire supply chain.
This could result in companies being obliged to appoint a non-executive director with the sole responsibility for overseeing prompt payment for goods and services.
Small Business Commissioner, Paul Uppal, has also been appointed to the Prompt Payment Code’s Compliance Board. Mr Uppal’s remit will be to help improve existing processes to ensure timely payments that he says will “encourage growth and productivity for SMEs across the UK”.
The Government has set a bold target of ensuring its own departments commit to paying 90% of disputed invoices from small firms within five working days.
It hopes to set an example for big businesses to maintain the highest possible payment standards to the UK’s army of small businesses that remain the bedrock of the national economy.
The Federation of Small Businesses (FSB) believes an end to the late payment saga could provide an additional £2.5 billion to the UK economy, while helping to keep a further 50,000 small firms open for business every year.
Mike Cherry, National Chairman, FSB, said: “Late payment is the biggest challenge affecting small businesses and it is good to see the Government getting serious about this issue, especially when it comes to large firms paying their supply chains promptly.
“The voluntary Prompt Payment Code is not working when it allows signatories like Carillion to pay on terms of over 120 days, so we want to see a new tough and transparent compliance regime being proposed.
“Involving the Small Business Commissioner, Paul Uppal with the Code is also right as it shows a more joined-up approach to this difficult issue.
“Further, it is a positive step that central government will set an example – paying 90% of undisputed invoices from small and medium-sized businesses within five days.”
The Government’s ambition for a modern Industrial Strategy has led to the launch of a Call for Evidence. This will be open until 29th November and will enable small firms, trade associations and other interested parties to contribute towards the creation of a fairer business environment for the UK’s small businesses and start-ups.