Large firms will face hefty fines if they pay suppliers late under new government plans to support small businesses.
Billed as ‘the most comprehensive support package in a generation’, the government says it is to give small businesses the tools to thrive and drive economic growth.
It pointed out that small and medium sized firms employ 60% of the country’s workforce and generate £2.8 trillion in turnover – but that for too long ‘the odds have been stacked against them’.
Late payments cost the UK economy £11bn a year and shut down 38 businesses every day, the government stated.
“From tradespeople and shopkeepers to start-up founders and family-run firms, too many work hard but don’t get the backing they deserve - held back by late payments and not getting the financial backing they need within a wider system that hasn’t worked in their favour,” it said in this week’s announcement.
Proposed laws will give stronger powers to the Small Business Commissioner to issue fines, potentially millions of pounds, against large firms that persistently pay their suppliers late.
The commissioner will also be given new powers to carry out spot checks and enforce a 30-day invoice verification period to speed up resolutions to disputes. The upcoming legislation will introduce maximum payment terms of 60 days, giving firms certainty they’ll be paid on time.
Under the proposals, audit committees will be legally required to scrutinise payment practices at board level. The government said this will put pressure on large firms to show they’re treating small suppliers fairly, and claimed these changes will free small businesses up from hours currently spent chasing overdue invoices.
“From builders and electricians to freelance designers and manufacturers – too many hardworking people are being forced to spend precious hours chasing payments instead of doing what they do best – growing their businesses,” declared Prime Minister Keir Starmer.
“It’s unfair, it’s exhausting, and it’s holding Britain back. So, our message is clear: it’s time to pay up.”
The plan has been welcomed by the Federation of Small Businesses (FSB), which described the proposal as an encouraging commitment.
“Making sure businesses are paid on time, that our high streets thrive, and creating conditions in which everyone can start and succeed in business are crucial priorities for small businesses, communities and the economy,” said FSB policy chair Tina McKenzie.
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