The U.K. government is intensifying efforts to address the persistent issue of late payments affecting small businesses and self-employed individuals. This initiative, which includes the proposal of new legislation and stricter enforcement of current laws, aims to compel larger firms to make timely payments. The government believes that improved payment practices are crucial for small businesses to maintain cash flow and avoid closures. With late payments leading to significant financial challenges and business failures, these measures are expected to bring much-needed relief.
What Are the Proposed Measures?
The government’s planned legislation mandates that large companies must disclose their payment practices in annual reports. This transparency will allow stakeholders, including company boards and international investors, to assess how these firms handle payments to smaller businesses. By highlighting payment practices, the government seeks to enforce accountability among larger companies, ensuring they uphold responsible financial conduct.
How Will Enforcement Be Strengthened?
To bolster compliance, the U.K. government will enhance the enforcement of existing regulations on late payment performance reporting. Currently, large companies are required to report their payment performance twice yearly. Failure to comply could result in criminal prosecution for the directors responsible. This increased enforcement reflects the government’s commitment to supporting small businesses by ensuring they receive payments on time.
Prime Minister Keir Starmer reiterated the government’s commitment to providing certainty around cash flow, stating:
“Late payments cost businesses tens of thousands of pounds and is one of the biggest reasons businesses collapse.”
Business Secretary Jonathan Reynolds emphasized the importance of equitable payment practices, remarking:
“Late payments are simply unacceptable, and this government is determined to level the playing field for small business.”
These statements underscore the administration’s dedication to creating a fairer business environment.
Previously, the European Commission also tackled similar issues, focusing on late payments to benefit small- to medium-sized businesses across Europe. These efforts, akin to the U.K.’s, aimed at improving the financial landscape for smaller enterprises, highlighting an international recognition of the issue’s severity.
Paul Stoddart, president of GoCardless, expressed approval of the government’s plans, saying:
“Stamping down on late payments through the measures laid out by the government will lead to economic growth.”
This sentiment reflects the broader business community’s optimism about the potential positive impact on growth and employment.
The initiative to address late payments is a significant step towards safeguarding small businesses from financial distress. By introducing legislative changes and reinforcing current regulations, the U.K. government aims to enhance transparency and accountability in corporate payment practices. These efforts could lead to a more stable financial environment for small enterprises, allowing them to focus on growth and development without the burden of delayed payments.
