Government to strengthen Prompt Payment Code

2 October 2018

Government to strengthen Prompt Payment CodeBusiness secretary Greg Clark has announced a new package of measures to safeguard small firms against late payments.

The Government says it is committed to ending "the unfair treatment of small businesses by companies who abuse their position by paying late for products and services".

The new protections include a strengthening of the Prompt Payment Code which, to date, has not done enough to stop late payment to small businesses in the UK.

A new "tough and transparent compliance regime" is being promised; a new consultation will consider the best way to ensure company boards put in place responsible payment practices throughout their supply chain. New rules could include an obligation for company boards to give one non-executive director specific responsibilities for prompt payment.

Indeed, the Government has said it will appoint a non-executive director with responsibility for the supply chain within each of its departments. Mike Cherry, chairman of the Federation of Small Businesses (FSB), described the move as a "really positive example to set, and one which large companies must now follow".

The Government has also pledged to pay 90% of undisputed invoices from small and medium-sized businesses within five days. In addition, it has announced that Paul Uppal, the small business commissioner, will join the Prompt Payment Code's Compliance Board to support his role in tackling late payment.

The FSB's Mike Cherry, said: "Late payment is the biggest challenge affecting small businesses and it is good to see the Government getting serious about this issue. The voluntary Prompt Payment Code is not working when it allows signatories like Carillion to pay on terms of over 120 days, so we want to see a new tough and transparent compliance regime being proposed.

"It's particularly positive to see the Government has listened to our proposal to make company boards appoint non-executive directors with responsibility for supply chain practice. This is the only way to transform boardroom culture in the UK, where it has become acceptable to pay small firms late if it helps cashflow, as we saw in the case of Carillion prior to its collapse."

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