Government outlines measures to tackle late payments

Business groups will be given new powers to tackle unfair payment practices under measures announced by the Department for Business, Innovation and Skills (BIS).

The new proposals include:

giving industry bodies more powers to challenge poor payment practices
increasing transparency by requiring large companies to report their payment practices
reinforcing the Prompt Payment Code (PPC) with new rules.
Ministers are currently in consultation about widening powers for industry groups.

They will discuss:

which businesses can be covered by a claim
which organisations can claim
dispute resolution options.
PPC reform is being scrutinised by the BIS and the Chartered Institute of Credit Management. Possible changes include introducing a maximum payment term and bringing in further powers of enforcement.

The government has pledged to lead by example by paying 80% of their invoices within 5 days, and include a maximum of 30-day payment terms on public sector contracts.

Business Minister Matthew Hancock said:

“Small businesses are the economic backbone of the UK, but some large companies are squeezing the life out of them by imposing unreasonable payment terms. This behaviour must stop, once and for all.”

“Breaking point”
A recent survey by the Federation of Small Businesses (FSB) found that 17% of small firms have faced “supply chain bullying” over the past 2 years. This includes smaller companies being charged by larger companies to remain in the supply chain, insisting on long payment terms or breaking the original terms of agreement on payment.

Commenting on the survey, John Allan, national chairman of the FSB, said:

“Small businesses are fast approaching breaking point. They are no longer prepared to put up with these sharp practices. Brands that think they can continue to squeeze their suppliers with impunity may get a nasty shock when what they are doing comes to the attention of their consumers.”

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