The UK government has unveiled new measures to support small businesses and the self-employed by tackling the scourge of late payments. It says that late payments cost small businesses £22,000 a year on average and lead to 50,000 business closures a year.
The government will consult on tough new laws which are designed to hold larger firms to account.
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In addition, new legislation will require all large businesses to include payment reporting in their annual reports. The intention is to put the onus on them to provide clarity in their annual reports about how they treat small firms. This will mean company boards and international investors will be able to see how firms are operating.
Enforcement will also be stepped up on the existing late payment performance reporting regulations. These require large companies to report their payment performance twice yearly on GOV.UK.
Under current laws, responsible directors at non-compliant companies who don’t report their payment practices could face criminal prosecutions including potentially unlimited fines and criminal records.
The consultation will also consider a range of further policy measures that could help address poor payment practices.
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By GlobalDataIssue impacts 2.6 million small businesses
Every quarter, 52% of small firms in the UK suffer from late payments. This means that around 2.6 million small firms face this issue. The Federation of Small Businesses describes it as one of the biggest problems facing SMEs.
UK prime minister Keir Starmer said: “We’re determined to back small businesses by unlocking their barriers to growth. Stamping out late payments is at the heart of this.
We know how important it is for business owners to have the peace of mind and certainty around their cashflow to keep their businesses alive. Late payments cost businesses tens of thousands of pounds and is one of the biggest reasons businesses collapse. After years of delay, we’re bringing forward measures that small businesses have long been calling for to tackle late payments once and for all.”
GoCardless acknowledges role of the Federation of Small Businesses
Paul Stoddart, President at GoCardless, added: “Small businesses are the backbone of the British economy, but it’s not an easy environment. The government’s decision to recognise this and tackle late payments directly is a welcome one. It is in large part thanks to the Federation of Small Businesses’ (FSB) continued effort to put this issue in the limelight.
“It’s important for decisive action to be taken because if a small business doesn’t get paid on time, it’s not going to survive. Stamping down on late payments through the measures laid out by the government will lead to economic growth. This will encourage an environment that allows small businesses to thrive, invest in new employees, boost wages and do business overseas, rather than spending time and resources chasing down late payments.
“We are a longstanding champion of helping businesses to get paid on time, and the need to allow small businesses to focus on growth. We are proud to be the headline sponsor of the FSB’s Late Payments Campaign, which reflects our commitment to bringing practical solutions to business owners and providing the tools needed to get paid on time. We look forward to seeing how the government’s plans unfold, and contributing to the future growth of small businesses and the communities they serve.”
