Consultation to tackle late payment

A consultation to tackle the problem of late payments to small and medium sized enterprises (SMEs) will be launched later this year, Prime Minister David Cameron has confirmed.

A YouGov poll commissioned by Barclays Bank found that 85 per cent of SMEs have had problems with late payments in the last two years. A total of £30.2 billion is owed in late payments to SMEs this year alone, according to the Bankers' Automated Clearing Service.

The consultation will look at how to:

  • encourage senior managers and boards to take greater responsibility for payment policy
  • increase transparency around which companies are prompt-paying and which aren't
  • strengthen the Prompt Payment Code (PPC) so that companies can be held to account against it
  • better enforce existing legislation, including the provisions on payment terms
  • encourage more companies to use their statutory right to add interest to late payments.

It will also consider whether there is a case for further legislation or penalties and if the Government can do more to help SMEs by promoting new technologies and services, such as electronic invoicing and mobile payments.

The PPC aims to ensure prompt payment for suppliers - particularly small businesses - with signatories agreeing to pay suppliers on time and to follow set processes for any payment issues that may arise. It has more than 1,400 signatories to date.

Speaking as the National Insurance Contributions Bill - which will cut the national insurance contributions bill of businesses and charities by £2,000 - was introduced to Parliament, the Prime Minister said:

"The government has already taken steps to help address this issue but I am clear that more needs to be done to build a business culture across all sectors of the economy that sees the fair, prompt and reliable payment of suppliers become a core corporate responsibility which is taken seriously at the most senior levels."

Katja Hall, chief policy director at the Confederation of British Industry, said:

"Late payment is a serious issue for all businesses but particularly for smaller firms, as cash flow is their life blood. Businesses already have a number of routes for recourse if they are paid late, but the reality is that few choose to act on late payment for fear of fall out with their customers."