UK Gov Launches Support for Small Businesses in Late Payment Crackdown.
A groundbreaking set of initiatives has been unveiled by the government today to bolster small businesses and self-employed individuals by combatting the widespread issue of late payments, deemed a “scourge” to the economy.
Research indicates that tardy payments cost small businesses an average of £22k annually, leading to the closure of approximately 50,000 businesses each year.
The Department for Business and Trade is set to launch consultations on fresh legislation in the upcoming weeks that will enforce larger corporations to be accountable, making it compulsory for them to include payment records in their annual reports.
In addition, the government plans to enhance the enforcement of existing regulations on reporting late payment performance, mandating large firms to report to the government twice a year.
Fostering economic growth
Every quarter, over half (52%) of small businesses in the UK encounter late payments, impacting around 2.6 million organisations. The Federation of Small Businesses identifies this as one of the primary challenges facing SMEs.
By cracking down on late payments, it is estimated that up to 5.5 million small businesses could experience growth, enabling them to invest in various areas:
The government also aims to introduce a new Fair Payment Code, replacing the Prompt Payment Code. Businesses will need to demonstrate adherence to good payment practices to receive a bronze, silver, or gold status. This initiative is envisaged to spotlight businesses that prioritise ethical transactions with suppliers and small businesses.
Paving the way for substantial reforms
“We understand the significance of ensuring business owners have financial stability to sustain their operations,” underlined Prime Minister Sir Keir Starmer.
He continued, “Late payments can incur substantial financial losses on businesses and are often a leading cause of business closures. After years of delays, we are spearheading measures that small businesses have urgently awaited to effectively tackle the late payment issue.”
Business Secretary Jonathan Reynolds affirmed the government’s commitment to “level the playing field” for small businesses. He emphasised, “In times of cashflow constraints, small enterprises face insolvency. Hence, it is imperative to hold larger corporations accountable for their payment practices and cultivate an environment conducive to growth and job creation.”
Expressing optimism, Small Business Minister Gareth Thomas stated, “Small businesses deserve timely payments, plain and simple. I am hopeful that today’s significant leap will pave the way for tangible changes supporting SMEs to flourish and contribute to economic expansion.”
Tina McKenzie, Policy Chair at the FSB, hailed the government’s initiative as a beacon of “real change”. By lending an ear to small enterprises and prioritising measures to eliminate growth impediments, she highlighted the government’s unwavering support for small businesses.
McKenzie concluded that this development instilled immense confidence in small businesses, serving as a resolute affirmation that the government stands in solidarity with them.
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