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August 1, 2019updated 02 Aug 2019 2:18pm

Small businesses criticise government response to late payment plans

Recent plans by the UK government plans to tackle the UK’s £16bn late payment problem have been criticised by trade bodies and SMEs.

By Christopher Marchant

Recent plans by the UK government to tackle the UK’s £16bn late payment problem have been criticised by trade bodies and SMEs.

Announced in June, the government has proposed new powers for the Small Business Commissioner to tackle late payments through fines and binding payment plans, company boards to be held accountable for supply chain payment practices for the first time, and a fund to encourage businesses to use technology to simplify invoicing, payment and credit management. However, it is not mandatory for businesses to sign up to the Prompt Payment Code.

The measures were criticised for a perceived lack of impact on the issue by organisations including the National Federation of Builders and the Association of Accounting Technicians (AAT).

Defending the plans, outgoing Chancellor of the Exchequer Philip Hammond said; “We have already taken steps to wipe out the UK’s late payment culture. Businesses leaders were clear today that more can be done to end this blight – including through the use of innovative payment platforms.”

Small Business Minister Kelly Tolhurst said: “We recently announced ambitious new measures to ensure small businesses get paid on time. This includes holding company boards accountable for payment practices and proposing new powers for the Small Business Commissioner.”

Some SMEs have also provided criticism of the measures. Peter Humphrey of Kesblade, a small property firm based in Rochester, said: “The latest Government announcement on late payments was extremely disappointing. Moving the Prompt Payment Code to the Small Business Commissioner is like shuffling the chairs on the Titanic, it doesn’t change anything other than the owner. Likewise, a technology fund that amounts to around 17p for each British business is utterly pathetic.

“Big business should be forced to sign the Prompt Payment Code and pay their suppliers in a maximum of 30 days. It’s not rocket science but the Government just doesn’t seem to get it.”

Caroline Danks, owner of LarkOwl, a small fundraising business in Devon, said: “The Government doesn’t seem to understand small business. A tiny technology fund, moving responsibility for the Prompt Payment Code and adding more bureaucracy onto company boards will do nothing at all to end the multi-billion pound problem of late payments.”

An AAT-backed YouGov poll undertaken in December 2018 showed that 73% of MPs supported all three of AAT’s prompt payment recommendations. These are;

For any organisation employing more than 250 people to be compelled to sign the Prompt Payment Code.

For maximum payment terms under the Prompt Payment Code to be halved from 60 to 30 days.

For persistent late payers to be fined by the Small Business Commissioner.

In October last year, small business minister Kelly Tolhurst announced plans to allow unrestricted access for SME invoice finance, with larger companies no longer able to block the practice through binding contract stipulations.

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