The Secretary of State for Business and Trade (Jonathan Reynolds)
Late payments and long payment terms continue to be a significant issue for small businesses and the self-employed across the UK. In 2022, small businesses were owed on average an estimated £22,000 in late payments from the businesses they supply. As well as the direct costs to businesses through lost and late revenue, there are also indirect costs, which include a reduction in productivity through lost time chasing late payments and forgoing investment and growth opportunities. We are determined to foster a strong payment culture in the UK by bringing the payment performance and behaviour of large companies more clearly into focus.
Therefore, we are announcing that we will lay secondary legislation in this parliamentary Session to make it a requirement for large companies to include information about their payment performance in their annual reports.
This measure will help increase transparency around the payment practices of large businesses and bring them into focus for boards and investors.
Introducing secondary legislation however only represents our first step. The Department for Business and Trade will also launch a public consultation within months on additional legislative measures to address late payments and long payment terms. We will take action as needed to ensure improvements in payment times, especially for small businesses and the self-employed.
We will also be launching a new fair payment code to be overseen by the Small Business Commissioner—a voluntary code of best practice for companies committed to fair and fast payments. This will replace the existing Prompt Payment Code, with a clearer and more measurable set of ambitious commitments and will be a further lever to improve the UK’s business payment culture by shining a light on the best performers.
Secondary legislation has also been laid today to amend the Reporting on Payment Practices and Performance Regulations 2017 and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017, to require qualifying companies and LLPs to publish certain information on their practices, policies and performance with respect to retention clauses in any qualifying construction contracts with suppliers. This measure will help increase transparency around retention policies and performance, and encourage improved payment practices.
This package demonstrates this Government’s determination to tackle the scourge of late payments, meeting the commitments laid out in our manifesto and plan for small business.
These initiatives will ensure more businesses are paid on time—ultimately increasing productivity, improving cash flow and driving growth.
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