A new report published by a cross-party coalition of MPs has called on the Government to introduce a new mandatory ’30-day rule’ for payment terms, in a bid to help alleviate the UK’s late payments crisis.
In recent months, more and more research has been surfacing indicating that small and medium-sized enterprises (SMEs) across numerous sectors are plagued by unpaid invoices – and that this is having a negative effect on growth in the SME economy.
Due to this, the Government is now facing increasing pressure to introduce tougher rules in an effort to tackle “disgracefully” bad payment practices across supply chains.
In a report published analysing the recent collapse of construction giant Carillion, which had a knock-on effect on hundreds of small businesses in the construction sector earlier this year, the committee of MPs described the group as a “notoriously late payer” and subsequently discovered that such practices were “rife” across the construction sector and other industries.
It also pointed out that the problem had negatively impacted smaller businesses all across the UK, forcing many into insolvency.
As a result, the committee is now calling for changes which would give the recently-appointed Small Business Commissioner new powers to fine so-called late payers across any sector.
On top of this, MPs have said that all medium and large companies – which are often considered to be the main offenders when it comes to late payments – should be forced to sign the Prompt Payment Code and agree to a ’30-day’ payment deadline.
“SMEs are vital to the health of our economy, providing jobs and prosperity to communities up and down the country,” said Rachel Reeves MP.
“But many SMEs are placed in a stranglehold by larger companies deliberately paying late and ruthlessly taking advantage of their suppliers, causing these firms financial instability.
“Unless the Government levels the playing field and acts to bring in a tougher regime for poor payment practices then we choke off the opportunity for SMEs to invest and grow in the future.”
The committee’s report has been welcomed by the Federation of Small Businesses (FSB), which says that the proposed changes could potentially save as many as 50,000 businesses annually if taken on-board.