Measures to tackle poor payment practices could help SMEs

New proposals to give business groups further powers to challenge late and unfair payment terms and practices on behalf of their members have been published in a February news release from the Department of Business, Innovation and Skills (BIS). The measures include: <!–more–>

  • Consulting on ways to tackle poor payment practices, such as by giving representative bodies greater powers to challenge grossly unfair payment terms and practices.
  • Leading by example on public sector procurement, by committing to pay 80% of central government invoices within 5 working days, with work on further reforms to increase prompt payment further down government supply chains.
  • New laws to increase transparency on the payment practices of large and listed companies and to help change corporate payment culture – introducing a requirement on the UK’s large and listed companies to report on their payment practice and performance.
  • Toughening up the Prompt Payment Code to give the code ‘more teeth’: including a possible maximum payment term and enhanced enforcement procedures.
  • Giving the Groceries Code Adjudicator the power to fine supermarkets for breaching the Groceries Supply Code of Practice. This will impose on the supermarkets an overarching principle of fair dealing with their direct suppliers, and include amongst other things, specific provisions governing terms of supply, timing of payments, marketing and promotional costs, and payments as a condition of being a supplier. The Adjudicator will also be able to impose penalties on the large supermarkets of up to 1% of their annual UK turnover.
  • The government recently sought views on other poor payment practices, such as paying to be on a supplier list and using dispute processes to delay payment. The consultation findings are being used to determine the need for, and scale of, any further action.

Business Secretary, Vince Cable, said:

Large companies using their economic might to impose unreasonable terms on their suppliers causes real problems for small businesses. It is a significant issue and there is agreement that we need to keep the pressure up to bring about real change. This is about making the UK a fairer and more trusted place to do business.

Business Minister, Matthew Hancock, said:

Small businesses are the economic backbone of the UK, but some large companies are squeezing the life out of them by imposing unreasonable payment terms. This behaviour must stop, once and for all.

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