Firms face fresh fines for making late payments to small businesses
Firms could be slapped with million-pound fines for late payments to small businesses in a new government effort to boost growth in local economies.
As part of reforms aimed at supporting businesses with fewer than 50 employees, Keir Starmer has vowed to crack down on delayed payments “holding Britain back”.
The Prime Minister said the government’s small business plan would offer entrepreneurs and firm owners more stability, with an independent body, the Small Business Commissioner, set to be able to carry out spot checks, enforce 30-day invoice verification periods and fine firms who pay suppliers too late.
The government’s crackdown on late payments is a response to concerns that small and medium sized businesses (SMEs) could be owed some £26bn, which has been preventing firms from investing for growth.
Official figures released by the Department for Business and Trade also suggest 14,000 businesses close each year as a result of late payments, costing the UK economy £11bn a year.
“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,” Starmer said.
“It’s unfair, it’s exhausting, and it’s holding Britain back. So, our message is clear: it’s time to pay up.”
New legislation will reduce the maximum payment terms of 60 days to 45 days and seek to speed up resolutions to disputes.
Tina McKenzie, policy chair of the Federation of Small Businesses (FSB), said tackling late payments was critical to boost communities and the wider economy.
“I’m pleased that FSB and the Government have been able to work in lockstep on the bold and ambitious measures needed to tackle the scourge of late payment through legislation, and other pro-growth, pro-small business measures.
“Today’s plan is an encouraging commitment from the Government to take the side of small businesses in the great growth challenge ahead.”
Small businesses to be given extra funding
Alex Veitch, director of policy at the British Chambers of Commerce (BCC), said: “This is a much-needed step forward in recognition and support for SMEs, which are the backbone of the UK economy.
“Late payments, access to finance and business support are all issues which have held back many smaller firms.
“For the government to achieve its Growth Mission, people need to stay in work and firms need to invest. The various strategies and plans published by the government over the last few months have set the strategic direction of travel.
“Now we need to see funding and real-world support to implement these policies, drive growth and reduce the cost of doing business.”
Other reforms to be introduced include a new government-led service to provide SMEs with advice on growth and changes to licensing for the hospitality and arts sector to be able to grow in designated zones.
The government also intends to lower business rates for firms hit hardest by costs in the retail, hospitality and leisure sectors.
To support the wider drive to boost SMEs, the British Business Bank is set to be given more than £3bn for guarantee programmes to allow finance providers to increase support to small businesses.
British Business Bank chief executive Louis Taylor said additional funding for other initiatives, including a start up loans scheme, would bring certainty to spending programmes rolled out by the government.
“We look forward to supporting even more smaller businesses in reaching their full potential, while generating further economic growth, jobs and prosperity across the UK’s Nations and regions.”