Small business leaders have welcomed a move announced today to crack down on late-payers by halving the Prompt Payment Code period to 30 days.
The reforms are part of a government plan to tackle £23billion of overdue invoices owed to firms across Britain and also include making CEOs and finance directors directly responsible for late payments to suppliers.
Under new reforms, companies that have signed up to the Prompt Payment Code will be obliged to pay small businesses within 30 days – half the time outlined in the current Code.
Despite almost 3,000 companies signing the Code, poor payment practices are still rife, according to the with many payments delayed well beyond the current 60-day target required for 95% of invoices. Currently, £23.4 billion worth of late invoices are owed to firms across Britain, impacting on businesses’ cash flow and ultimate survival.
According to the Federation of Small Businesses, around 50,000 businesses close every year due to late payments, damaging Britain’s prosperity and threatening jobs. Its National Chairman, Mike Cherry, said: “A late payment crisis was massively stifling the UK economy before Covid hit. The pandemic has deepened it. FSB has campaigned for good payment practice to become the norm across the UK economy, not least through a toughening of the Prompt Payment Code and the adoption of 30 days as the new maximum payment period.
“Ending our pernicious poor payment culture for good over the coming months will be fundamental to turning our hopes of economic recovery into reality.”
Small Business Minister Paul Scully said: “Our incredible small businesses will be vital to our recovery from the coronavirus pandemic, supporting millions of livelihoods across the UK.
“Today, we are relieving some of the pressure on small business owners by introducing significant reforms to the UK payments regime – pushing big businesses to pay their suppliers on time.”
“By signing up to the Prompt Payment Code and sticking to its rules, large firms can help Britain to build back better, protecting the jobs, innovation and growth which small businesses drive right across the UK.”
