Crack down on late payments that harm small businesses

The government recently unveiled new measures to support small businesses and the self-employed by tackling the scourge of late payments, which according to the Smart Data Foundry is costing SMEs £22,000 a year on average and according to FSB research, leads to 50,000 business closures a year.

The government will consult on tough new laws which will hold larger firms to account and get cash flowing back into businesses – aimed at helping to grow the economy – it says.

Enforcement will also be stepped up on the existing late payment performance reporting regulations, which require large companies to report their payment performance twice yearly on GOV.UK.

Under current laws, responsible directors at non-compliant companies who don’t report their payment practices could face criminal prosecutions including potentially unlimited fines and criminal records.  

FSB research shows that every quarter in 2022, 52% of SMEs small firms in the UK suffer from late payments, meaning roughly 2.8 million small firms face this issue, with the Federation of Small Businesses describing it as one of the biggest problems facing SMEs.

Late payments are just one element of the problem, with some SMEs forced to wait months for contracts to be fulfilled and some are even forced to take out loans against their own homes to manage cash flow.