To mark Small Business Saturday, an annual celebration of the small businesses that make up the majority of the UK’s enterprises, Culture Secretary Sajid Javid announced a further tightening of late payment laws as part of the Small Business Bill.

Javid, the son of a shop owner, said the Government is planning to include legislation that will mandate 30-day payment terms for public sector supply chains, and plans to name and shame those who flout the rules. The new measures will also help freelancers, contractors and other micro-businesses reclaim owed money without the need for court action, which is usually regarded as too great a cost except for the largest of contracts.

The Government previously announced plans to force large companies to publish their payment terms, and Labour recently floated the idea of mandatory penalties for those who do not pay their invoices on time.

Speaking in Birmingham on Saturday, Javid said:

“I can promise that we will take action. We will legislate to take action against unfair contractual practices. I am confident our measures will help thousands of businesses get the billions of pounds they’re owed. And it’s right we do so. Because you’re the backbone of our economy, and you shouldn’t have your backs broken by clients who don’t keep their side of a deal.”

Recent figures pegged the amount owed to small businesses last year at £40 billion – £10 billion more than previously estimated – which Javid labelled an “absolute scandal.”

IPSE, whose recent manifesto called for such action, welcomed the news:

“Late payment is a crippling issue for the UK’s smallest businesses. The current catch-22 situation means that micro-businesses are often unable to chase clients for payment that isn’t forthcoming for fear of damaging important business relationships. When it comes to payment, big businesses have long had their smaller providers over a barrel. Introducing a small business conciliation service to resolve disputes will go a long way in helping freelancers get the payment they deserve without lengthy court action.”

The Department for Business, Innovation and Skills is set to consult with small businesses over how the Prompt Payment Code, a voluntary scheme backed by the Institute of Credit Management, can be strengthened. The Code, despite repeated bolstering, has yet to make any material impact on the credit control landscape for small businesses. Business Minister Matt Hancock will also write to all FTSE 350 companies asking them to adhere to the terms of the Code.

Photo by Foreign and Commonwealth Office