Government takes action to tackle late payments to SMEs

• Conservative Government announces a series of measures to tackle late payment of invoices and long payment terms supporting the small businesses that are the backbone of the UK economy
• SMEs are most affected by late payments, account for 99 per cent of firms in the UK, and are a priority for the Conservative Party
• Measures announced today are a further step toward our objective to make the UK the best place in the world to start and run a business

Today the Conservative Government has unveiled its response to the review of UK prompt payment policy, which will improve and increase the awareness of existing tools and regulations available to businesses, and allow small businesses to check the payment times of their larger customers.

Firms, especially SMEs, have faced challenges in the last few years with supply chain and inflationary pressures arising from the pandemic and Russia’s illegal invasion of Ukraine. 

Late payment of invoices and long payment terms are key issues that businesses, especially SMEs, highlight as a barrier to their growth. Owners and managers are forced to spend disproportionate time chasing payments. The resulting cash flow problems cause even good, viable firms to struggle.

That is why today we are announcing that we are extending and improving the Reporting on Payment Practices and Performance Regulations and conducting a Cash flow and Prompt Payment Review. 

This will improve payment culture in the UK to support smaller businesses, many of whom do not have the resources to accommodate long or late payments from their business customers.

Kemi Badenoch, Secretary of State for Business and Trade, said: 

“SMEs make up 99 per cent of firms in the UK and are the lifeblood of our economy. I know that late payments are a massive barrier to growth and I am determined to fix that. 

“The measures we’re announcing will take a big step towards making sure SMEs get their payments on time, helping firms to grow and prosper.”ENDS

Notes to Editors:

• The Government will work with partners (such as business representative organisations) and other existing initiatives (Growth hubs, Help to Grow) to help deliver an improved payment culture which will include guides on negotiating payment terms.
• The powers of the Small Business Commissioner will be broadened, enabling it to undertake investigations and publish reports where necessary on the basis of anonymous information and intelligence. The SBC will be renamed to better reflect its role.
• There will be closer integration of the Small Business Commissioner with other late payment functions.
• We will strengthen the Prompt Payment Code so that business signatories must reaffirm their commitment every two years to stay on it.
• We will extend the Reporting on Payment Practices and Performance Regulations, taking forward legislation to extend payment performance reporting obligations. This will include new metrics for reporting, including a value metric, so businesses and commentators can see the value of invoices, including invoices paid late, and a disputed invoices metric.
• There will be an effective and proportionate compliance regime to help ensure that businesses required by law to report their payment data, do so.
• We will promote the benefits of digital payment technologies and of embedding prompt payments as part of firms’ ESG (environmental, social, governance) programmes, if they have them.