Government unveils Small Business Plan

The UK Government has unveiled its Small Business Plan that aims to support SMEs nationwide, particularly through tightening rules around late payments and improve access to finance.

Small and medium sized firms employ 60% of the country’s workforce and generate £2.8 trillion in turnover. However, late payments are one of the biggest barriers to small business growth, causing cashflow problems that stop firms from scaling up and investing in their future and cost the economy an estimated £11 billion a year and shut down 38 businesses every day.

At the heart of the government’s plan to support small businesses is a significant package of reforms to tackle late payments that are set to be the toughest in the G7.

The new laws are set to give stronger powers to the Small Business Commissioner to empower them to wield fines, worth potentially millions of pounds, against the biggest firms who persistently choose to pay their suppliers late.

The Small Business Commissioner will be given new powers to carry out spot checks and enforce a 30-day invoice verification period to speed up resolutions to disputes. The upcoming legislation will also introduce maximum payment terms of 60 days, reducing to 45 days, giving firms certainty they’ll be paid on time.

Audit committees, under the proposals, will also be legally required to scrutinise payment practices at board level, placing greater pressure on large firms to show they’re treating small suppliers fairly backed by mandatory interest charges for those who pay late.

These changes will also save small businesses valuable time, freeing up hours currently spent chasing overdue invoices so they can focus on growing their business instead. It is anticipated that accelerating SME growth by just 1 percentage point per year, could deliver £320 billion to the UK economy by 2030.

Prime Minister Keir Starmer said:

“From builders and electricians to freelance designers and manufacturers—too many hardworking people are being forced to spend precious hours chasing payments instead of doing what they do best – growing their businesses.

“It’s unfair, it’s exhausting, and it’s holding Britain back. So, our message is clear: it’s time to pay up.“

Business and Trade Secretary Jonathan Reynolds said:

“This country is home to some of the brightest entrepreneurs and innovative businesses in the world, and we want to unleash their full potential by giving them back time and money to do what they do best – growing our local economies.

“Our Small Business plan – the first in over a decade –  is slashing unnecessary admin costs, making it easier for businesses to set up shop and giving SMEs the financial backing they need.“

Alongside support with late payments, the Government is also launching a new £4 billion wave of financial support aimed at boosting growth and supporting more small businesses to start up and grow and address challenges SMEs face in accessing finance.

Backing includes a £1 billion boost for new businesses, with 69,000 Start-Up Loans and mentoring support to inspire the next generation of entrepreneurs and small business owners. The British Business Bank will also get a boost to its total guarantee to £5 billion to help lenders offer more small business loans through the ‘ENABLE programme’.

Groups representing UK SMEs have welcomed the announcements in the Small Business Plan.

Policy Chair of the Federation of Small Businesses (FSB), Tina McKenzie, said: 

“Making sure businesses are paid on time, that our high streets thrive, and creating conditions in which everyone can start and succeed in business are crucial priorities for small businesses, communities and the economy. It’s very welcome that the Prime Minister has today made them his Government’s priorities. “

Fiona Graham, Chief Operating Officer for Family Business UK said:

“Family Business UK welcomes today’s publication of the Small Business Plan as a positive step towards creating a fairer and more resilient environment for small family-run firms.? We are pleased to see many of the areas highlighted by our members addressed in this plan. 

“Family businesses make up over 85% of all private sector firms?in the UK and are deeply rooted in their communities. But like many small businesses, they are held back by red tape and limited access to finance and support – challenges that this plan rightly seeks to address. “

While in Greater Manchester, Subrahmaniam Krishnan-Harihara, Deputy Director of Research at Greater Manchester Chamber of Commerce, highlighted the need for support in digital transformation that would ensure the government’s plan is successful. He said:

“The Government’s new Small Business Plan, with its ‘toughest crackdown on late payments in a generation’, is a welcome and necessary move for SMEs. The proposals, including new fining powers for the Small Business Commissioner and a mandated 60-day payment term, are a crucial step towards improving cash flow and fostering business stability. The new £4bn financial support package is also a significant boost for start-ups and scale-up businesses.

“However, a crucial element for success will be the complementary role of technology. While these new proposals provide the legislative and punitive measures, modern technology offers a route to higher efficiency. The Government’s broader push for digital adoption is key here. By leveraging cloud accounting platforms, e-invoicing and other automation tools, businesses can reduce the administrative burden and ensure faster payments. The ultimate impact of these new rules will therefore depend on a two-pronged approach: effective enforcement of the regulations and widespread adoption of the digital tools that make compliance easier.“