The government is set to consider whether to institute a new regime of fines for late paying companies.
The Prime Minister this week announced the forthcoming launch of a new consultation into late payment. Under the consultation ministers will consider a range of factors concerning late payment and potential means by it can be mitigated – one of which is a new regime of penalties.
News of the consultation follows a YouGov report suggesting that some 85 per cent of small businesses have endured late payment over the last two years. Outstanding payments to SMEs are now thought to exceed £30 billion, and the average business waits 38 days for payment.
Announcing the launch of the consultation David Cameron admitted that the Prompt Payment Code had not achieved enough. “I am clear that more needs to be done,” he said. “It’s not right that suppliers are not getting paid on time for the work they do and the services they provide and I know that late payment can have devastating effects on our small and medium-sized businesses.”
The consultation will consider the following:
- How we can encourage greater oversight and responsibility for payment policies at senior management and board level
- What can be done to increase transparency around which companies are good payers and which ones are not
- How the Prompt Payment Code can be strengthened, and whether there is more that can be done to hold companies to account against it
- Whether more can be done to enforce existing legislation, including the provisions on payment terms – for instance the prohibition of ‘grossly unfair’ payment terms
- What can be done to encourage more companies to make use of their existing statutory right to interest for late payments
- Whether there is a case for further legislation or penalties
- Whether government can do more to help SMEs to help themselves, including through new technologies and services like electronic invoicing and mobile payments
The idea of financial penalties was floated by business secretary Vince Cable back in August, following the relative failure of the voluntary prompt payment code. BIS officials were said to be considering how fines might be implemented.
It is thought that business owners will have the opportunity to respond to the consultation.Do you think late payers should be fined? Let us know in the comments.