Government to improve late payments with changes to Prompt Payment Code
Code will promote 30 day terms as standard with a 60 day maximum limit to stop "unacceptable" payments culture
Business minister Matthew Hancock has announced major changes to the Prompt Payment Code to help end poor payment practices for small businesses.
Part of the government’s “long term economic plan to build a better Britain”, the changes will promote and encourage large firms to commit to 30 day payment terms as standard with a 60 day maximum.
These changes will be reinforced by the new Code Compliance Board, which will include representatives from industry bodies who will investigate challenges made against signatories to the code. Any signatory found to be in breach of the payment code will be removed unless they can prove exceptional circumstances.
Although the code is voluntary, over the coming weeks businesses will be actively encouraged to comply and the government hopes that the changes will ultimately improve UK payment culture.
Speaking at the EEF manufacturer’s association yesterday, Hancock said of the announcement: “Making small businesses wait an unreasonable time for payment is entirely unacceptable. I know first-hand the great burden that late payment can place on firms – and how it can strain family finances – which is why I am committed to stopping it.
“Big companies should lead by example and pay small suppliers within 30 days. I have already written to the FTSE 350 urging them to sign up to the Prompt Payment Code. […Fairer payment practices will help small businesses grow and create jobs.
The Forum of Private Business has welcomed the changes with its chief executive, Phil Orford MBE, commenting:
“No small business should have to wait for an unreasonable length of time to be paid. We welcome that the government recognises that more than 60 days is unreasonable in most circumstances. It is fundamentally unfair that small businesses are being used as a line of credit for larger organisations and propping up big business, and the government’s moves to provide much needed teeth to the Prompt Payment Code are what many small business suppliers have wanted to see.”