On May 13, during the King’s Speech, the government announced the Small Business Protections (Late Payments) Bill, which aims to address the challenges of late payments faced by small businesses.
The key provisions of the bill include a 60-day cap on payment terms for large companies when dealing with smaller companies, an interest charge set at 8% above the Bank of England’s base rate for overdue payments, and a time limit for raising invoice disputes. Additionally, the bill prohibits the deduction of retention payments under construction contracts. Large companies with a history of late payments will be required to have their boards or audit committees report on their payment performance and plans for improvement. The Small Business Commissioner will receive enhanced powers to impose fines on companies that consistently pay late, investigate suspected poor payment practices, and resolve disputes between businesses.
The bill will advance through several parliamentary stages, culminating in Royal Assent, which will formalize it as an Act.
Reactions to the announcement have been largely positive, though some experts believe that certain gaps must be addressed. Glenn Collins from ACCA emphasized that while the initiative to combat late payments is commendable, its success will depend on actual improvements in cash flow for small businesses, which are crucial for their planning and growth. Similarly, Lisa Cleaver of eCapital noted that although fines for late payments are beneficial, the challenge remains for small businesses to confront larger clients without jeopardizing relationships. Business banking expert Joe Phelan added that effective legislation could significantly benefit the freelance community, emphasizing that the focus should now shift toward implementing practical reforms.
Why this story matters: The bill could significantly improve cash flow and stability for small businesses, which are critical to the economy.
Key takeaway: The Small Business Protections (Late Payments) Bill introduces measures to combat late payments and empower the Small Business Commissioner.
Opposing viewpoint: There are concerns that enforcing these measures may still put small businesses at risk of damaging valuable relationships with larger clients.
