The UK government has launched a tough new measure against the dominance of the scourge of late payments which destroys small businesses and the self-employed. It is estimated that late payments average £22,000 a year that benefits business whereas it ends the business life of about 50,000 businesses each year. This will be consulted over for more stringent legislation that will bind large firms to account for delayed payments, thereby allowing the returned cash flow to businesses in support of the broader goal of driving economic growth.
A cornerstone of the reforms will be to require large businesses to publish payment performance in annual reports; it will then be possible for company boards and international investors to review how firms treat smaller counterparts. In addition, a growing proportion of firms will also receive increased and concerted efforts at enforcing existing regulation, where breaches of the regulation are prosecuted: unlimited fines that a non-compliant company can incur, and, most importantly, a criminal record for the directors with responsibility.
In the months ahead, there will be a consultation set up further into finding policy options that combat poor payment practices. The current reality is that over half of UK small businesses face quarter-on-quarter late payments. Actually, 2.6 million SMEs currently go through this condition of late payments. This forces them to take loans or wait until months end so that the contracts can be completed, thus seriously hampering their cash flow and growth.
Business Secretary Jonathan Reynolds quipped, “Late payments are quite unacceptable and pose a massive threat to small businesses,” further saying that the government was keen on making the big business responsible for a fairer business environment.
Besides this, the government announced a new Fair Payment Code, which is going to replace the Prompt Payment Code. This new format is to be given gold, silver, or bronze status, depending upon the respect a business shows with regards to timely payment practices. The initiative will foster speedy payment from firms and reward good practice.
Prime Minister Keir Starmer said that the government is committed to supporting small businesses and removing the barriers that prevent them from growing. He said that removing late payment stands as one of the essential steps toward providing business with the financial stability they need to succeed.
The reforms outline the government’s overall approach to supporting SMEs, which also includes business rate reforms and supporting increased small business exports.
Read more – click here