The UK Government has introduced new rules aimed at tackling the longstanding issue of late payments affecting businesses. These new regulations will require companies to include detailed payment practices in their annual reports, making the issue of late payments more transparent. This step is part of the government’s broader strategy to improve business conditions, particularly for small and medium-sized enterprises (SMEs), who are often disproportionately affected by late payments.
Late payments have long plagued businesses, especially SMEs, which make up 99.9% of the business population in the UK. According to a study by the Federation of Small Businesses (FSB), around 50,000 companies close down every year due to cash flow problems caused by late payments. This creates an unsustainable environment where smaller firms often struggle to survive, while larger corporations benefit from extended payment terms. The Government’s move to enforce stricter reporting is designed to address this imbalance.
Under the new rules, larger companies will be required to include a section on their payment practices in their annual financial reports. This section must detail how quickly they pay their suppliers, the proportion of invoices paid on time, and any outstanding amounts. The goal is to ensure that businesses across the supply chain are treated fairly and to deter companies from intentionally delaying payments.
According to the Department for Business and Trade, the reporting will “shine a light on poor payment practices, holding businesses to account and promoting timely payments.” The transparency provided by these new regulations is expected to lead to a cultural shift, encouraging companies to pay on time.
The new rules have been welcomed by many within the business community. Small business owners, in particular, see this as a necessary step towards levelling the playing field. Martin McTague, National Chair of the FSB, said, “Late payments are a scourge on small businesses, and this initiative will help ensure that larger companies treat their suppliers fairly. It’s not just about getting paid, but getting paid on time, which is critical for cash flow.”
RHA Managing Director Richard Smith said, “We’re in favour of measures aimed at boosting economic growth, as evidenced by our recent Blueprint document. As an economic enabler, businesses across the road transport sector play a critical role in the supply-chain and in the daily lives of all of us. To get the growth the country needs, money needs to move around the economy and late payments are damaging to that.
“Late payments can have a real impact on businesses and the overall economy. In particular, this acts as a barrier to growth for SMEs. We welcome steps to tackle the issue by increasing transparency. We want to work in collaboration with Government to help drive growth across the entire road transport sector and the whole UK economy.”
On the other hand, some larger businesses have raised concerns about the potential administrative burden. However, the government has been quick to point out that many large firms already keep track of their payment practices, and integrating this information into annual reports should not be overly complex.
The new reporting requirement is part of a broader shift in corporate governance towards transparency and accountability. By making payment practices visible to the public and stakeholders, the government aims to incentivise better behaviour, fostering a business environment where late payments are no longer the norm.
Author: Mark Salisbury, Editor, Fleetpoint
