The Business Secretary Vince Cable announced new plans to help small businesses deal with slow paying clients on Friday, saying the Government will make it a legal requirement for companies to publicly publish their payment terms. The news comes after a study showed that UK firms are owed around £30 billion, or £31,000 per company.
The Business Secretary said:
“We will now make it compulsory for companies to publish information about their payment terms so that those who are not playing fair will be shamed into changing their behaviour.”
There are also plans to strengthen the Prompt Payment Code, a voluntary scheme backed by the Department for Business, Innovation and Skills and the Institute of Credit Management. It is thought the new rules could be announced in the Queen’s speech during the State Opening of Parliament this Wednesday.
Industry response to the new measures has been muted, with many believing the Government has stopped short of introducing meaningful change. Simon McVicker, Director of Policy and Public Affairs at PCG said:
“Talk of changing the ‘culture of payment’ among larger firms will only go so far in addressing the problem. In order for it to be effective, the Prompt Payment Code must be compulsory for large companies and it must include sanctions for the worst offenders. We also need a system for small businesses to report offenders anonymously, so they are not compelled to jeopardise important client relationships by sticking their heads above the parapet.
“The reality is that the only way to ensure big companies pay up on time is to take direct legislative action.”
Likewise the Institute of Credit Management issued a statement saying they were “disappointed that the Department for Business, Innovation and Skills has once again ‘ducked the issue.’” Philip King, the group’s Chief Executive, said:
“What is critical is the certainty of payment, more than being caught in arguments over 30 or 60 day terms.
“But there clearly comes a point when the terms of payment should be deemed unfair, for example when they are imposed by the buyer without consultation or negotiation, when they are retrospectively applied to contracts already in place, and/or where they are demanded in circumstances that will clearly be to the detriment of the supplier and exploiting the weakness of his bargaining position. We articulated this view in our official response, but it appears the issue has been ducked.”
Photo by Nina Matthews