Larger construction businesses could be fined if they don’t pay smaller suppliers on time under new powers for the Small Business Commissioner, proposed by the government.
Small business minister Kelly Tollhurst yesterday unveiled a package of potential measures to tackle late payment through financial penalties and binding payment plans.
- Eight construction firms removed or suspended from payment code
- Government letter warns contractors to pay on time
- Length of time contractors take to pay revealed
The news came in the government’s official response to a consultation looking at the impact of unfair payment practices, which ran from October to November last year.
Under the plans, which will now be subject to another consultation, company boards would be held accountable for payment practices to small businesses. The government would also force audit committees to report payment practices in company annual reports.
The government said it will consult on strengthening the powers of the Small Business Commissioner, with new powers potentially including compelling information and disclosure of payment terms and practices, and imposing financial penalties or binding payment plans on large businesses found to have unfair payment practices.
Responsibility of the voluntary code of best practice – the Prompt Payment Code – would also be moved to the Small Business Commissioner, a role created in 2017 tackle the issue of late payment.
Another proposal is to give the power to the Small Business Commissioner to hand out fines to large businesses that failed to report payment practice twice a year under the Payment Practices Reporting Duty. The existing mandatory requirement already allows for the prosecution of those which do not comply.
Meanwhile, the government is also looking at setting up a Business Basics Fund competition of up to £1 million in funding to encourage businesses to use technology to simplify invoicing, payment and credit management.
In April this year, seven constrution firms – Balfour Beatty, Costain, Engie Services, Interserve Construction, Kellogg Brown & Root, Laing O’Rourke and Persimmon – were suspended from the Prompt Payment Code for failing to pay suppliers on time. John Sisk & Son was kicked off the scheme completely.
Meanwhile, Build UK last year started publishing details of how long on average its members take to pay suppliers. The government has also been attempting to push contractors into paying more promptly, with the Cabinet Office sending them a letter in April warning them to pay suppliers within 30 days or risk being frozen out from future contracts.
Small business minister Kelly Tolhurst said: “The vast majority of businesses pay their bills on time, with the amount owed in late payments halved over the last five years. But as a former small business owner, I know the huge impact a late payment can have on the ability of a small business to plan, invest and grow.
“Small businesses are the backbone of our economy and through our modern Industrial Strategy we want to ensure the UK is the best place to start and grow a business. These measures will ensure that small businesses are given the support they need and ensure that they get paid quickly – ending the unacceptable culture of late payment.”
Small Business Commissioner Paul Uppal said: "During the first 16 months of my post I have been struck by the trepidation felt by small businesses when talking about late payment with their large suppliers.
"The government has a range of measures in place to tackle late payment and this consultation is a further step in the right direction to protect and support small businesses.
"I welcome any additional provisions which will strengthen the influence my Office has in tackling poor payment practice and levelling the existing playing field."
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