Government failing to act on poor payment practices affecting small businesses

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• Business, Energy and Industrial Strategy Committee

The BEIS Committee report, published in December, recommended the Government introduce a statutory requirement for companies to pay within 30 days, move as soon as possible to require all medium and large companies to sign the Prompt Payment Code, and equip the Small Business Commissioner with powers to fine those companies who pay late. 

The Government's response does not include any new practical measures on payment practices to SMEs.  On late payments, for example, the Government says it is considering responses to a consultation but does not set out any likely concrete actions to address poor payment practices.

Chair's comments

Rachel Reeves MP, Chair of the Business, Energy and Industrial Strategy Committee said:

"In our report, we made a series of recommendations to toughen the payment practices regime and ensure that small businesses are paid fairly and on time. We heard that many SMEs face financial instability and are unable to plan and invest for the future because they are victim to large companies deliberately paying late.

"The Government says that small businesses are the backbone of our economy. But these are empty words when the Government is not willing to bring forward measures to ensure SMEs are paid on time. Each day that the Government delays action - on late payments, on powers for the Small Business Commissioner, on retention payments and project accounts - leaves small business facing another day of being out of pocket. Small businesses need the Government to do better and deliver the concrete measures necessary to win the fight against poor payment practices."

The BEIS Committee's Small businesses and productivity report says that for a small and medium-sized enterprise (SME) to succeed it is crucial they are paid fairly and on time.  However, the report found that bad payment practices have led to the failure of many SMEs and prevented others from growing and improving their productivity. The report said that initiatives to address poor payment practices, including the Government's Prompt Payment Code, had been ineffective.

The report also examined the ‘long tail' of unproductive small businesses, looking at a variety of issues relating to SMEs including support and advice, leadership, management and digital skills, and scale-ups.

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