The Government says that small businesses across the UK will benefit from the most comprehensive support package in a generation, as it launches a bold new plan to give them the tools to thrive and drive economic growth as part of its Plan for Change.
At the heart of the plan is a the most significant package of reforms in a generation to tackle late payments, with plans to introduce the toughest laws on late payments in the G7.
Late payments are one of the biggest barriers to small business growth —causing cashflow problems that stop firms from scaling up and investing in their future. The new laws are set to give stronger powers to the Small Business Commissioner to empower them to wield fines, worth potentially millions of pounds, against the biggest firms who persistently choose to pay their suppliers late.
The Small Business Commissioner will be given new powers to carry out spot checks and enforce a 30-day invoice verification period to speed up resolutions to disputes. The upcoming legislation will also introduce maximum payment terms of 60 days, reducing to 45 days, giving firms certainty they’ll be paid on time.
Audit committees, under the proposals, will also be legally required to scrutinise payment practices at board level, placing greater pressure on large firms to show they’re treating small suppliers fairly backed by mandatory interest charges for those who pay late.
These changes will also save small businesses valuable time, freeing up hours currently spent chasing overdue invoices so they can focus on growing their business instead. Taken together, this will help ensure businesses are paid on time and end the scourge of late payments which costs the UK economy £11bn per year and closes down 38 UK businesses every day.
Prime Minister Keir Starmer said:
“From builders and electricians to freelance designers and manufacturers—too many hardworking people are being forced to spend precious hours chasing payments instead of doing what they do best – growing their businesses.
“It’s unfair, it’s exhausting, and it’s holding Britain back. So, our message is clear: it’s time to pay up.
“Through our Small Business Plan, we’re not only tackling the scourge of late payments once and for all, but we’re giving small business owners the backing and stability they need for their business to thrive, driving growth across the country through our Plan for Change.”
Policy Chair of the Federation of Small Businesses (FSB), Tina McKenzie, said:
“Making sure businesses are paid on time, that our high streets thrive, and creating conditions in which everyone can start and succeed in business are crucial priorities for small businesses, communities and the economy. It’s very welcome that the Prime Minister has today made them his Government’s priorities.
“I’m pleased that FSB and the Government have been able to work in lockstep on the bold and ambitious measures needed to tackle the scourge of late payment through legislation, and other pro-growth, pro-small business measures.
“The plan is an encouraging commitment from the Government to take the side of small businesses in the great growth challenge ahead.”