Large businesses owe their small suppliers £23.4 billion in late payments, according to the Government, sparking a review by the Department for Business, Energy and Industrial Strategy (BEIS).
Business Secretary Grant Schapps said he would launch the review to scrutinise payment practices and “prevent small firms from being ripped off by larger companies”.
The review will also “consider the progress made in specific sectors of the economy in combating late payment and will include an examination of current payment reporting regulations and the prompt payment code”, according to the BEIS.
“The UK’s 5.5m small businesses are an integral part not just of our economy, but of our communities too, and this Government is firmly on their side.
“That many small firms are routinely paid late is intolerable and presents a real barrier to productivity, the creation of high-skilled jobs and ultimately economic growth.”
According to research carried out by cloud accounting software provider Xero, payments to small businesses were an average of 8.2 days late in September, the highest late payment time since August 2020.
Calling for tougher penalties for larger businesses that fail to meet agreed payment terms, managing director of Xero, Alex von Schirmeister said the previous Government’s mini-budget has “left small businesses in limbo at a time when they need stability”.
Simon Gray, head of business at the Institute of Chartered Accountants for Wales and England (ICAEW), said:
“We’ve been here before, but it’s really starting to become a problem again. Businesses are facing pressures; costs are rising, and domestic sales are falling.
“As a result, there’s a squeeze in the middle on working capital, and one of the ways you manage working capital is you chase debt faster and pay your suppliers slower.”
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