UK Government Unveils New Fair Payment Code to Combat Late Payments
The UK government has announced the implementation of a new Fair Payment Code to replace the Prompt Payment Code, aiming to support SMEs. This initiative addresses the widespread issue of late payments that cost SMEs significantly each year.
The Impact of Late Payments on SMEs
Research from the Department of Business and Trade reveals that SMEs lose £22,000 annually due to late payments, consequently leading to 50,000 closures each year. Therefore, Labour’s new legislation aims to hold larger companies accountable by requiring them to report payment practices in their annual reports, ultimately promoting transparency and fairness.
Government Commitment to Small Businesses
Business Secretary Jonathan Reynolds stressed that late payment harm small businesses, threatening their growth and stability. The government’s upcoming regulations aim to curb bad practices, level the playing field, and support SMEs across the country.
Widespread Challenges Faced by SMEs
The Federation of Small Businesses reported that late payments represent a significant challenge, affecting 52% of small businesses each quarter—roughly 2.6 million firms. This statistic underscores the need for urgent action to improve cash flow for these enterprises.
A Vision for the Future
Prime Minister Keir Starmer reaffirmed his commitment to supporting small businesses, emphasizing the costly impact of late payments, which contribute to business collapses. Moreover, he highlighted the government’s focus on removing growth barriers to enhance financial stability for SMEs and, in turn, boost their economic contributions.
Building a Supportive Business Environment
Small Business Minister Gareth Thomas emphasized the importance of timely payments, stating, “Small businesses deserve to be paid on time; it’s as simple as that.” Furthermore, he expressed optimism that this new initiative significantly fosters a business environment where SMEs can flourish.
Economic Growth Through Fair Payment Practices
Paul Stoddart, president of GoCardless, stressed that addressing late payments is vital for economic growth and supporting SMEs. Moreover, he noted that this initiative will help small businesses thrive, invest in new employees, and expand internationally. Furthermore, the introduction of the Fair Payment Code marks a significant shift toward a more equitable landscape for UK SMEs, prioritizing sustainability while enabling long-term success and growth opportunities.