Large companies that fail to settle their bills to suppliers on time could face fines, under government proposals designed to tackle the problem of late and slow payment of commercial debts.
Kelly Tolhurst, the small business minister, said that a package of measures she had outlined would end an “unacceptable culture” of late payment.
Under the plans set out by the business, energy and industrial strategy department yesterday, the role of Paul Uppal, the small business commissioner who mediates between large and small companies over payment disputes, would be strengthened.
Mr Uppal, 52, a former Tory MP, would be able, for the first time, to fine businesses that do not pay bills within agreed contractual terms. The size of the penalties that he could levy are subject to consultation. He also could be given powers to compel companies to provide information and disclosure of payment terms and practices and could enforce “payment plans” to ensure that ’ bills are quickly settled.
Slow and late payment of the invoices of small businesses and freelancers is a pernicious issue for suppliers that a succession of governments have promised to tackle, only for their efforts to have little lasting effect. According to the Federation of Small Businesses, late payment forces about 50,000 businesses to the wall every year.
Mike Cherry, national chairman of the federation, said that companies would be “delighted” with the proposals, which include the commissioner’s office taking over the running of the prompt payment code, a voluntary scheme that sets out rules for fair treatment of suppliers by large businesses.
The business department said that it would strengthen an existing requirement on large businesses to report payment practice to a national database twice a year. However, a government spokeswoman said that there were no plans to close a loophole that allows large businesses to dodge the requirement simply by contracting and paying for services via a smaller subsidiary.
The plans were welcomed by groups including IPSE, which represents self-employed people, and the Institute of Directors. However, the Association of Accounting Technicians said that the government “could and should” go further. Phil Hall, its head of public affairs and public policy, said that the government had ducked an opportunity to halve maximum payment terms under the code from 60 to 30 days.