Proposed New Powers for Late Payments

NEW PROPOSALS to help small businesses get paid on time have been announced by Small Business Minister Paul Scully today (1 October).

Currently £23.4 billion worth of late invoices are owed to small firms across Britain, impacting on businesses’ cash flow and ultimate survival.

The proposals, part of a new consultation launched today, will give new powers to the Small Business Commissioner (SBC) to order companies to pay suppliers, either as a lump sum or agreed payment plan, when a complaint against them for late payment has been investigated and upheld. Penalties and fines can be issued for failing to do so.

New powers for investigations

Other proposals are to launch investigations into suspected bad payment practice, without the need to have first received a complaint from a small business. The SBC would have the power to compel companies to share information during an investigation.

The power to expand the scope for complaints to the SBC is also being suggested. It would allow the Commissioner to investigate complaints about other businesses relating to payment matters. It would also allow the SBC to review and report on issues such as supply problems, or barriers to the adoption of payment technology.

Lastly, the power to claim investigation costs from an investigated company when there are findings against them, is proposed.

Late payment burden

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.”

Many business organisations have welcomed the consultation. According to the Federation of Small Businesses (FSB), around 50,000 small companies close each year due to late payments. According to FSB, 62% of small UK companies experience late payment at some point. A lengthening of payment times as a result of the pandemic is reported by 10% of businesses.

Impact of pandemic on late payment

The impact of coronavirus on businesses has brought forward this issue as a more urgent issue, government says.

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

Prompt Payment Code

The SBC administers the Prompt Payment Code (PPC), a voluntary scheme for companies agreeing to pay suppliers in 60 days.  Plans to strengthen and reform the PPC include signatories to the Code committing to pay 95% of invoices from smaller businesses within 30 days.

The consultation opens today and will run until 24 December 2020. Businesses are invited to share their views here.