On 4 October 2018, we launched a call for evidence, asking for views on how to create a responsible payment culture for small business. I have published the full Government response to that call for evidence and placed copies in the Libraries of both Houses.
The Government are committed to supporting small and medium-sized enterprises (SMEs) to start well and grow, including a network of 38 growth hubs across England providing advice, guidance and support. As part of our industrial strategy we have an action plan to unlock over £20 billion of investment in innovative and high potential businesses. And where we see practices that unfairly constrain SMEs’ finance choices, we are prepared to act. For example, we recently removed a barrier that was preventing some SMEs from using invoice finance because of prohibitive contract terms imposed by their customers. This new measure is expected to provide a long-term boost to the UK economy worth almost £1 billion.
While there are a number of measures already in place to tackle late payment, from the prompt payment code, the ability to charge interest on late payments and increased transparency through the payment practices reporting duty, the call for evidence told us that there is more to do to improve the payment landscape. This is why I have announced that I will now take further and firmer action to tackle the scourge of late payments, while maintaining a holistic approach to culture change by using all of the avenues available to us in this space.
I will shortly be launching a consultation seeking views on strengthening the small business commissioner’s (hereafter “the commissioner”) ability to assist and advocate for small business in the area of late payments, through the provision of powers to compel the disclosure of information and seeking views on suitable sanctions for failure to comply.
I have also announced that the responsibility of the voluntary prompt payment code is to move to the commissioner and be reformed: this will unify prompt payment measures with the commissioner and address weaknesses within the current code’s operation.
I will take a tough compliance approach to large companies who do not comply with the payment practices reporting duty. The legislation allows for the prosecution of those who do not comply and I will use this enforcement power against those who do not comply where necessary.
The Government will launch a business basics fund competition with funding of up to £1 million, which will encourage SMEs to utilise payment technology.
I also intend to establish a ministerially led group to bring together key Government Departments to act on improving prompt payment across both the public and private sectors.
We are working with UK Finance and the finance sector to review the role supply chain finance plays in fair and prompt payment, including the potential for an industry led standard for good practice in supply chain finance. We also want to bring greater transparency to how supply chain finance is reported in company accounts and assessed in audits, by working with the Financial Reporting Council to develop guidance and build it into their sampling of companies’ accounts.
Our modern industrial strategy aims to make Britain the best place to start and grow a business and removing barriers to growth is key to this. The response to the call for evidence and the package of measures I have announced will tackle the continuing issue of late payments to ensure this happens.