The Labour Party has promised greater protection from late payments for small businesses, under an amendment to the government’s Small Business Bill.
The new rules would see penalties automatically posed on large companies that fail to pay smaller suppliers within 30 days of invoicing.
Proposed by shadow business minister Toby Perkins, the changes would force Britain’s largest companies to complete a quarterly report listing all late payments to small suppliers.
Late payers would be forced to pay interest of 8% APR above the Bank of England base rate to the supplier, or a face a fine of up £10,000.
SMEs already have the right to claim interest on late payments, but research cited by Labour showed that only 10% of businesses exercise this right, despite 22% having ended client relationships due to consistent late payments.
Mr Perkins said:
“Late payment is one of the key challenges facing small business and a series of voluntary initiatives have failed to bring about the culture change required.
“Our new amendment will lift the onus on small firms to pursue large business customers to pay interest and create a reporting regime that will force late payers to self report and automatically pay interest to their suppliers in the event of late payments.
“The government’s record on this is lamentable. They u-turned on a commitment to name and shame large companies who pay late, and delayed the implementation of EU directives which would help until the last day possible.”
The government has previously vowed to “go to war” over late payments, but recent statistics from BACs show that today small forms are owed an average £38,186.
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