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Tackling late payments
Published:  30 May, 2014

The Business Secretary is proposing new measures for greater transparency of company payment practices to help smaller firms get paid on time.

Following a consultation in which a clear majority of businesses called for more disclosure to tackle late payment, the government will require larger firms to publish information of their payment practices, and will also act to remove legal barriers preventing firms from accessing invoice finance.

The government will also work with the Institute of Credit Management (ICM) to strengthen the Prompt Payment Code and to increase accountability of signatories. Where legislation is required to implement the package, it will be introduced when parliamentary time allows.

Business Secretary Vince Cable said: “For too long too many large companies have been getting away with not paying their suppliers on time to maximise their profits. It is small business that is suffering as a result and it needs to stop.

“The government has taken action to create a responsible payment culture but we need to go further. We will now make it compulsory for large companies to publish information about their payment practices so that those who are not playing fair can be held to account.”

Phil Orford MBE, chief executive of the Forum of Private Business, said: “The government has helpfully steered clear of measures that seek to over simplify the variety of relationships that exist in the private sector, for instance by not introducing a maximum payment term. The Forum is also pleased the government is open to reintroducing reporting requirements for larger companies, creating greater transparency and highlighting good and bad payment practice. Finally, strengthening the Mystery Shopper scheme, together with further measures on e-invoicing in the public sector, are excellent steps forward.”

“While overall the proposals are encouraging, we believe the government has ducked one crucial aspect of late payment; an ‘obligation’ under EU late payment legislation to put in place a mechanism that allows businesses to maintain their anonymity while challenging grossly unfair payment terms. The definition of ‘grossly unfair’ is hard to pin down, but being able to challenge it would create legal precedents to help other companies.”

Today’s (30 May 2014) government response to the discussion paper is available online at ‘Building a responsible payment culture’.