Industry praise for late payment crackdown
The Road Haulage Association (RHA) has welcomed government plans to clamp down on late payments to small businesses, an issue which is said to cost the UK economy £11 billion each year.
As a result of planned changes, the UK will have the toughest laws on late payments in the G7, the government claims, which it says will provide support to small businesses and unlock growth.
The new laws will give the small business commissioner stronger powers to issue fines against large firms that persistently choose to pay their suppliers late, according to the Department for Business and Trade which is spearheading the changes. Spot checks and a 30-day invoice verification period will also be introduced to speed up dispute resolutions.
In addition, the new legislation will introduce maximum payment terms of 60 days, reducing to 45 days, to provide companies with more certainty around when they will be paid.
The RHA’s managing director Richard Smith praised the development, saying that late payments impact businesses throughout the supply chain, including many of the association’s members.
“Running a business is becoming more expensive month on month,” he said.
“Higher operating costs and lower volumes are regular features for many operators. With average profit margins of just two per cent, we need policymakers working collaboratively with us to minimise financial burdens on companies. To achieve long-term growth, government must partner with industries like ours that are crucial to the economic health of the country.
“Late payments in particular cost the UK economy £11bn annually and shut down over 38 firms every day (according to the FSB). They’re one of the biggest barriers to business growth.
“We’ve continually argued that these antiquated payment terms pressure businesses who must pay for fuel, maintenance, and wages upfront. These new reforms, particularly the legal cap on payment terms and increased oversight, directly address those concerns, and this is to be welcomed.”
Mr Smith added that the plans could go some way to significantly improving financial resilience in the sector, if enforcement and implementation were ensured to be effective through continued dialogue with industry.
“As the autumn Budget approaches, businesses want clarity and certainty through ongoing engagement,” he said.
“To encourage business investment, firms need conditions that allow them to thrive, conditions best developed through partnership between government and industry. This work continues and we’ll be engaging with Ministers in the weeks and months ahead.
“Ensuring businesses are paid on time and creating conditions where everyone has a chance to succeed are crucial priorities for companies, communities and the economy.”
Announcing the plans in late July, the prime minister Keir Starmer said the changes were being introduced because too many hard-working people were “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,” he said.
“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.”
Jonathan Reynolds, the business and trade secretary, added: “This country is home to some of the brightest entrepreneurs and innovative businesses in the world, and we want to unleash their full potential by giving them back time and money [to grow] our local economies.
“Our small business plan – the first in over a decade – is slashing unnecessary admin costs, making it easier for businesses to set up shop and giving SMEs the financial backing they need.”
