Businesses backed by new measures to tackle late payments
- UK is backing small businesses with the toughest laws on late payments in the G7
- Sweeping new powers for the Small Business Commissioner, including multi-million-pound fines to hold big businesses and persistent offenders to account
- Measures will help tackle cost of living for entrepreneurs and SME owners by ensuring they are paid on time and prevent the abuse of retention payments in construction
Small businesses will be paid on time – that’s the clear message from government as it cracks down on late payments, with the largest set of reforms in over a generation.
The Small Business Commissioner will be given sweeping new powers to investigate poor payment practices, adjudicate payment disputes, and fine the worst offenders – with fines worth tens of millions for firms that persistently pay late or fail to comply with the new laws.
The measures will tackle a problem costing the UK economy £11 billion every year and ease the cost of living for entrepreneurs and SME owners who are often forced to wait months – or even years – to receive money they have already earned and having to chase endlessly to receive it.
Some 38 businesses shut their doors every single day because they are not paid on time – the equivalent of 266 a week, and well over a thousand in any given month.
Every small business owner, including tradespeople, freelancers, family firms and the self-employed, have to waste time and money chasing unpaid invoices when they could be growing their business.
The changes will include a new 60-day cap on payment terms on all large firms when paying smaller suppliers. New mandatory interest on late payments will also be introduced, with a requirement for all commercial contracts to include statutory interest set at 8% above the Bank of England base rate.
For example, if a small business is owed £10,000 by one of its customers and is paid 60 days later than the agreed payment date, they will be owed £10,293.15 including mandatory interest (£10,000 plus £193.15 interest plus £100 compensation).
Business Secretary Peter Kyle said:
Far too many businesses are forced to shut down because they have not been paid – that is simply unacceptable.
We are unveiling the strongest, most robust changes to payment laws in over a generation – laws that will transform the fortunes of small businesses for years to come and make their day to day lives much easier.
We are unveiling the strongest, most robust changes to payment laws in over a generation – laws that will transform the fortunes of small businesses for years to come
