Late payments banned ending nightmare for SME businesses!

The Government’s latest announcement that the scourge of late payments owed to SME businesses will be legally addressed comes as welcome news!

38 businesses a day close because of late payments. Thats in excess of 266 business closures a week. Over One thousand companies closing down with all the attendant job losses every single month!

A huge amount of time is spent by well-run companies chasing overdue payments for services and good they have already supplied or manufactured having spent their money providing these.

This new Bill alters the way companies pay each other, which should end the pain of excess delays and unscrupulous practices which always hit the smallest businesses hardest!

Key takeaways of the Small Business Protections Bill (formally known as the Commercial Payments Bill) include: –

• Introduction of a 60-day cap on payment terms on all big companies paying smaller suppliers, mandatory interest on late payments, set at 8% above the Bank of England base rate
• A complete ban on the practice of withholding retention payments under construction contracts.

Regardless of your political persuasion, Sir Keir Starmer’s comments on this new payment legislation and it’s impacts for SME businesses and saving jobs is hard to disagree with!

The Prime Minister had this to say; “Small businesses are the backbone of our economy – run by people who take risks, create jobs and keep communities going. This government is firmly on their side.

“Too many small business owners are spending hours chasing money they are owed and when payments don’t come through, the cost is personal. It’s about whether you can pay your staff, keep the lights on, or invest in your future.

“Today we’re changing that with the toughest action on late payments in a generation, so small businesses get paid on time and get the backing they need to grow, create jobs and serve their communities.”

There will also be new powers for the Small Business Commissioner enabling them to investigate poor payment activities, judge disputes and importantly, fine the worst offenders – awarding the offenders fines that could be worth many tens of thousands of pounds for those with the worst persistent late payment records.

This news is of critical importance to all small businesses and particularly welcome news for the SME business community!

As the Business Secretary Peter Kyle commented: “Costing the UK economy £11 billion every single year, late payments choke growth, cost jobs, and force too many good businesses to close. That ends today.

“Through this landmark bill we are delivering the toughest payment reforms in over a generation, to give the UK the strongest legal framework in the G7, and back small businesses with the certainty they need to grow and thrive.”

You can view the article in Business Insider by clicking HERE

The Small Business Commissioner is also getting new powers to investigate poor payment practices, adjudicate disputes, and fine the worst offenders – with potential fines that could be worth tens of millions for persistently late payers.

Business Secretary Peter Kyle said: “Costing the UK economy £11 billion every single year, late payments choke growth, cost jobs, and force too many good businesses to close. That ends today.

“Through this landmark bill we are delivering the toughest payment reforms in over a generation, to give the UK the strongest legal framework in the G7, and back small businesses with the certainty they need to grow and thrive.”

The Bill builds upon and strengthens legislation first laid out in the 1998 Late Payment of Commercial Debt Act.  

After working with the Federation of Small Businesses, these Bill powers will also ensure boards or audit committees of persistently late‑paying large companies publish clear explanations of poor payment performance and the steps they are taking to improve it.

FSB Policy Chair Tina McKenzie said: “Tackling late payment is one of the biggest things the government can do to help small businesses grow. FSB is proud to have worked with ministers on these reforms and it’s encouraging to see the voice of small firms reflected in legislation. Giving audit committees a clear role in payment practices is a vital step in changing late payment culture.”