On 19 September 2024, the government announced, at FSB’s Westminster office, various measures aimed at tackling the problem of the late payment of business invoices. All small businesses know the serious knock-on effects late payment can cause to their own cashflow and ability to meet their own overheads including mortgages, rent, staff, and other outgoings, and the government recognises this issue is particularly problematic for smaller businesses and the self-employed.
The proposed package of measures includes:
- A new Fair Payment Code (FPC) replacing the existing Prompt Payment Code. The FPC will open for signature in the autumn, and businesses will need to demonstrate they have met good payment standards before they can obtain official FPC compliant status. This will be either gold, silver or bronze status according to the business' payment practices. The objective is to make 30-day payment periods the minimum standard for which all businesses should aim.
- New legislation, to be brought forward shortly, requiring all large businesses to include payment reporting in their annual reports.
- An increase in enforcement activity to make sure that large businesses comply with their statutory reporting obligations concerning their payment practices.
- Proposals for the reform of audit and audit committees, with a view to small businesses being confident that they will be paid promptly.
- The publication of updated guidance on business payment practices and reporting requirements.
- A consultation will be launched in the coming months, and the government says it will consider a range of further policy measures to tackle poor payment practices.
The government has stated that it will work closely with small and large businesses as well as groups such as FSB to discuss what further measures can be considered to crack down on late payments while ensuring we strike the right balance and avoid excessive burdens on businesses. Tina McKenzie, Policy Chair at FSB, said:
“This is what real change looks like. Listening to small firms and prioritising action to tear down each and every barrier to growth. The Business Secretary has clearly recognised the importance of eradicating bad payment culture, which so devastates the UK supplier base and holds back growth. This series of actions today – including the crucial steps being taken to deliver on Jonathan Reynolds’ commitment on audit committees – shows the Government is rightly focused on delivery and working in partnership with the business community.
There will be so many decisions the Government needs to get right, early – an actively pro-small business budget, a good industrial strategy and tackling late payment. Announcing this programme of work today is a huge confidence boost for the small business community and a clear signal the new Government intends to stand up for small firms.”