UK Government Unveils Initiative to Combat Late Payments and Support Small Businesses

The UK government has unveiled a new initiative aimed at assisting small businesses and the self-employed by tackling the ongoing problem of late payments. These late payments have a significant financial impact, costing small enterprises an average of £22,000 each year and contributing to around 50,000 business closures annually. To combat this issue, the government is contemplating the introduction of strict regulations to hold larger corporations accountable and ensure prompt payment, thereby encouraging the growth of small businesses.

As part of this initiative, the government plans to implement legislation requiring large firms to report their payment practices bi-annually on the official government website, GOV.UK. This measure aims to enhance transparency and accountability in corporate dealings with smaller businesses. Additionally, these reports will be included in the annual reports of these companies, providing clear information on their payment behaviours. Companies that fail to comply with these regulations could face serious penalties, including criminal charges and unlimited fines for their directors.

In the coming months, the government will launch a consultation to explore further policy measures aimed at addressing harmful payment practices that affect small firms. Data from the Federation of Small Businesses indicates that 52% of small companies experience late payments on a quarterly basis, impacting approximately 2.6 million businesses across the UK.

The government is committed to removing barriers that hinder the growth of small businesses. One of the key components of this initiative is the introduction of a new Fair Payment Code, which will replace the existing Prompt Payment Code. Businesses will need to demonstrate their commitment to good payment practices to achieve certification under this new code, which will be awarded in categories ranging from gold to bronze. This system will highlight firms that consistently treat their suppliers fairly.

This policy is part of a broader strategy aimed at supporting the growth of small and medium-sized enterprises (SMEs). Alongside tackling late payments, the government is working to reduce trade barriers and reform business rates. Their new industrial strategy also includes increased support for SME exports, with the overall goal of creating a more favourable environment for small businesses to thrive.