British Retail Consortium welcomes government decision to crack down on late payments

In what is reported as the “largest set of reforms in over a generation”, small businesses will now be paid on time as the government commits to cracking down on late payments.

The new measures aim to boost the economy and give small businesses better cash flow, and will include a new 60-day cap on payment terms on all large firms when paying smaller suppliers.

Mandatory interest on late payments will also be law, and there will be a requirement for all commercial contracts to include a statutory interest at 8% above the base rate from the Bank of England.

The Small Business Commissioner will be given the ability to investigate poor payment practices, adjudicate payment disputes, and fine the worst offenders. 

Fines will be worth tens of millions for firms that are consistently late with payments or do not comply with new laws.

The BRC said the new policy will tackle an issue that is costing the UK economy £11bn every year. It will also ease the pressures from the cost of living for small business owners, often forced to wait months or years for money already earned.

It is reported that an average of 38 businesses close every single day because they are not paid on time.

The BRC and Federation of Small Businesses have also worked together so that “boards or audit committees of persistently late-paying large companies will be required to publish explanations for poor payment performance and the actions they are taking to address it”.

Business secretary Peter Kyle said: “Far too many businesses are forced to shut down because they have not been paid – that is simply unacceptable. 

“We are unveiling the strongest, most robust changes to payment laws in over a generation – laws that will transform the fortunes of small businesses for years to come and make their day-to-day lives much easier.” 

BRC assistant director of consumer, competition, and regulatory affairs Graham Wynn said: “Retailers have built strong, trusted relationships with their suppliers and have worked hard to create payment terms and processes that benefit all parties. 

“While the government is taking strong action, it is nevertheless clear that the government has listened to businesses, and we welcome the proposals on prompt payments that allow contracts between large retailers and large suppliers to be exempted from the 60-day requirement while continuing to provide small suppliers with advantageous terms. 

“Furthermore, systems that would allow the payment clock to start ticking at agreed points when goods are being imported will help smooth payment operations for all parties. We also support additional resources for the Small Business Commissioner, so that rogue businesses that try to take advantage of small businesses can be brought to book.”