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The government has announced it will introduce tougher measures to address late payments to small businesses ahead the publication of the Prompt Payment & Cash Flow Review.
Small businesses are particularly affected by late payment of invoices and long payment terms imposed by larger organisations, which can slow business growth and force business owners and managers to spend disproportionate time chasing payments and causing cash flow problems that can lead viable businesses to struggle.
In 2022, Small and Medium-sized Enterprises (SMEs) were owed on average an estimated £22,000 in late payments, and estimates that improving payment culture in the UK could boost the economy by £2.5 billion.
Measures being proposed by government include extending payment reporting obligations, improving advice available to SMEs on negotiating payment terms and managing their cash flow, and expanding the powers of the Small Business Commissioner to undertake investigations and publish reports.
Secretary of State for Business and Trade, Kemi Badenoch, said:
“SMEs make up 99 per cent of firms in the UK and are the lifeblood of our economy. I know that late payments are a massive barrier to growth and I am determined to fix that.
“The measures we’re announcing will take a big step towards making sure SMEs get their payments on time, helping firms to grow and prosper.“
Small Business Minister, Kevin Hollinrake, said:
“Small businesses form a crucial part of large companies’ supply chains. Without them, they couldn’t do business. It’s only right that they should be paid promptly for their services.
“SMEs that are paid on time can do more business, scale up and make more profits, delivering growth for the economy.“