Review into late payments to small businesses announced

The Payment and Cash Flow review will scrutinise existing payment practices and the measures in place to make sure small firms are not ripped off by their larger clients, with over £23.4 billion currently owed in outstanding invoices to UK businesses.

The review will consider the progress made in specific sectors of the economy in combating late payment and will also include an in-depth examination of current payment reporting regulations and the Prompt Payment Code.

In addition, the statutory review of the Small Business Commissioner will help ensure that the UK has the right arrangements in place to best support small businesses.

Business Secretary Grant Shapps said that many small firms are routinely paid late that presents a real barrier to productivity, the creation of high-skilled jobs, and ultimately economic growth.

“This review will allow us to build on the success we have had so far in curbing late payment, unshackling small businesses from this exploitative practice and creating a system that is fit for the future,” he said.

“While we crack on with this work, I also want to remind big businesses of their duty to ensure their smaller suppliers are paid promptly.”

Mr Shapps said the government is already demonstrating its own commitment to prompt payment through the Procurement Bill, which is currently being debated in Parliament. The legislation sets out the requirement for 30-day payment terms to apply in public sector supply chains that will help level the playing field for SMEs and encourage more businesses with smaller budgets to bid for public sector contracts.

Also within the scope of the review is the role of technology-enabled accountancy platforms in tackling late payments and promoting a better understanding of prompt payment measures within the small-business community.

The role of finance particularly how major banks and innovative lenders can help small businesses manage their cash flow and identify barriers to accessing finance will also be part of the review’s remit.

The review will include a consultation on the payment reporting regulations, setting out specific proposals for renewal and improvement of these duties. 

The review of the Small Business Commissioner will consider both its role and effectiveness, drawing on the consultation on the commissioner’s powers that was conducted in 2020.