Small Businesses Will Benefit From Restrictions on Late Payments, UK Government Says
The U.K. government aims to crack down on late payments, saying it will propose new laws and step up the enforcement of existing ones to speed up large firms’ payments to small businesses and the self-employed.
Late payments cost small businesses 22,000 pounds (about $29,000) a year on average, resulting in 56 million hours of lost productivity across the economy, according to a Thursday (Sept. 19) press release. They also cause 50,000 business closures each year.
“We know how important it is for business owners to have the peace of mind and certainty around their cash flow to keep their businesses alive,” Prime Minister Keir Starmer said in the release. “Late payments cost businesses tens of thousands of pounds and is one of the biggest reasons businesses collapse.”
To tackle this problem, the government will propose new legislation in the coming weeks requiring all large companies to include payment reporting in their annual reports, according to the release.
The requirement will make clear how these firms treat small businesses and will enable company boards and international investors to see how they are operating, the release said.
The government will also step up enforcement of existing late payment performance reporting regulations, per the release. Current laws require large companies to report their payment performance twice a year and impose criminal prosecutions on the responsible directors at companies that fail to do so.
The government will also propose other measures addressing poor payment practices in the coming months, according to the release.
“Late payments are simply unacceptable, and this government is determined to level the playing field for small business,” Business Secretary Jonathan Reynolds said in the release. “When the cash flow runs dry, small firms go under, which is why we need to hold larger [businesses] to account with their payment practices and foster an environment that supports growth and jobs.”
Paul Stoddart, president of bank payment company GoCardless, welcomed the news that the government plans to tackle late payments.
“Stamping down on late payments through the measures laid out by the government will lead to economic growth,” Stoddart said in a statement emailed to PYMNTS. “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.”
The European Commission has also been looking to clamp down on late payments, saying these efforts will benefit small- to medium-sized businesses (SMBs), PYMNTS reported in January 2023.
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