Govt and industry to tackle late payment

Wednesday 29 October 2014

The issue of late payment is set to be tackled by the government and a number of big industry players.

A new Advisory Board is being formed with a view to strengthening the Prompt Payment Code and ensure suppliers are paid on time; an issue that has long plagued sole traders, limited companies and people just setting up a business.

Representatives on the board come from such businesses as Aviva, Barclays, City of London Corporation, Fujitsu, Greggs, Bury Council, Skanska and Stort Chemicals. It is stated in a release from the Department for Business, Innovation and Skills that these representatives were chosen because of their good reputations on payment practices.

The Prompt Payment Code contains a set of principles for businesses to follow when they are dealing with suppliers and when it comes to paying them.

So far, over 1,700 businesses and public authorities have committed to these principles. Among those who have committed are the representatives of the new Advisory Board.

The Board will be looking at ways to improve monitoring and enforcement of the code, raise awareness of it and offer advice on whether the code needs to be updated.

It had its first meeting on October 28th and aims to have concrete proposals implemented by Spring 2015.

Business minister Matthew Hancock said: "Late payment continues to plague businesses, putting a strain on cash flow and preventing plans for growth. We have committed to tackling this problem, but there is no silver bullet. This is about a change in culture, which needs businesses and government to work together.

"The new Advisory Board will strengthen the Prompt Payment Code, cracking down on poor practice and showcasing good practice."

At present, the government is also trying to tackle late payment through the Small Business, Enterprise and Employment Bill, which is currently being put through Parliament. It contains proposals to reform public procurement and also to make it a necessity for large companies and listed firms to report on their payment practices. This action is intended to increase transparency around how companies pay their suppliers.

It was shadow small business minister Toby Perkins who recently put an amendment forward for the Bill, which would force corporations to file a quarterly report on late payments. Where these reports revealed that freelancers had been left out of pocket, each of these workers would automatically net interest of eight per cent APR. While suppliers do have the option to charge interest to customers, the bill would make it so that this interest is compulsory and late payers could face fines of up to £10,000 for failing to pay.

A spokesperson for Brookson said: "We are pleased to see that the government and industry are working together to take action against late payment. This is an issue that puts small businesses at risk and could potentially lead to insolvency. For this reason, we try to advise contractors who come to us on this matter."

Figures from BACs show that small businesses collectively face a burden of £39.4 billion in overdue payments.

By Victoria McDonnell

Get in touch

Please select your type of enquiry:

Brookson on Twitter