Small businesses across the UK will benefit from the most comprehensive support package in a generation, as the government launches a bold new plan to give small businesses the tools to thrive and drive economic growth as part of its Plan for Change.
Small and medium sized firms employ 60% of the country’s workforce and generate £2.8 trillion in turnover. However, for too long, the odds have been stacked against small businesses.
From tradespeople and shopkeepers to start-up founders and family-run firms, too many work hard but don’t get the backing they deserve - held back by late payments and not getting the financial backing they need within a wider system that hasn’t worked in their favour.
That’s why the Government is taking serious action to back small businesses and give them the tools they need to grow. This builds on the solid foundation of certainty and stability this government has already delivered—through the trade deals we’ve secured, four interest rate cuts, and a long-term industrial and trade strategy that’s helping businesses plan ahead with confidence.
At the heart of the plan is a the most significant package of reforms in a generation to tackle late payments, with plans to introduce the toughest laws on late payments in the G7.
Late payments are one of the biggest barriers to small business growth —causing cashflow problems that stop firms from scaling up and investing in their future. Every day, hardworking businesses close their doors because they aren’t paid on time.
The new laws are set to give stronger powers to the Small Business Commissioner to empower them to wield fines, worth potentially millions of pounds, against the biggest firms who persistently choose to pay their suppliers late.
The Small Business Commissioner will be given new powers to carry out spot checks and enforce a 30-day invoice verification period to speed up resolutions to disputes. The upcoming legislation will also introduce maximum payment terms of 60 days, reducing to 45 days, giving firms certainty they’ll be paid on time.
Audit committees, under the proposals, will also be legally required to scrutinise payment practices at board level, placing greater pressure on large firms to show they’re treating small suppliers fairly backed by mandatory interest charges for those who pay late.
These changes will also save small businesses valuable time, freeing up hours currently spent chasing overdue invoices so they can focus on growing their business instead. Taken together, this will help ensure businesses are paid on time and end the scourge of late payments which costs the UK economy £11bn per year and closes down 38 UK businesses every day.
Date: 3 August