UK businesses face fines for late payment of suppliers


Large British companies face fines or court orders if they fail to pay their smaller suppliers on time under plans being drawn up by the government.

As part of a crackdown on large businesses that take months to pay suppliers, the powers of the small business commissioner look set to be substantially strengthened.

Ministers will consult on whether the commissioner should have the power to order companies to pay a supplier and partners, either as a lump sum or agreed payment plan, or impose further penalties, including fines.

The consultation is also looking at expanding the power of the commissioner to compel companies to share information during an investigation, and to launch probes into suspected bad payment practice without the need to have first received a complaint.

Paul Scully, minister for small business, said chasing late payments remained a significant burden on small companies and created cash flow problems for those least equipped to manage them.

FSB research shows that around 50,000 small companies close each year due to late payments. About £23.4bn was owed to small and medium-sized businesses last year in late payments, Mr Scully said, with research showing that there was a cost of £4.4bn a year just to collect money owed. This deficit has been exacerbated during the pandemic when larger firms have delayed payments to conserve their own cash.

In 2019, retailer Holland & Barrett became the first big company to be named for late payment of suppliers, according to the commissioner. At the time business groups had raised concerns that the only powers the commissioner had were highlighting bad practices, which meant companies could ignore its work, or refuse to co-operate.

READ  What is Bitcoin, what’s happened to the price and how can you buy the cryptocurrency?

The government has forced larger companies to publish their payment data twice a year on a website but critics have said its raw format is difficult to use.

Other measures being proposed by the government include increased board level responsibility and standards of good practice.

The Conservative’s 2019 manifesto promised to clamp down on late payment and strengthen the powers of the commissioner to support small businesses that are least able to cover financial shortfalls and find temporary finance more difficult and more expensive to obtain.

SMEs can charge interest on late payments but few want to claim against their big clients, fearing they would lose contracts.

Since launching in December 2017, the commissioner has recovered £7.5m owed to small businesses and named eight large businesses that had paid their small business suppliers late following an investigation of a complaint.

The Groceries Supply Code of Practice which is enforceable with fines has been effective. Since 2013 the number of supermarket suppliers reporting late payment has dropped from 35 per cent to 12 per cent.

Mike Cherry, national chairman of the Federation of Small Businesses, said: “We know that paying small businesses late is debilitating, and the practice has increased during Covid-19. It deprives small firms of cash flow, holds back growth, undermines productivity and forces many to take out external finance. In thousands of cases a year this causes the closure of small businesses.”



READ SOURCE

LEAVE A REPLY

Please enter your comment!
Please enter your name here