Large businesses to be fined for late payments to suppliers but do new measures go far enough?


New proposed powers will allow the Small Business Commissioner to fine large businesses for late payment to their small business suppliers for the first time.

There is also a proposed measure for introducing penalties on businesses who are found to have ‘unfair payment practices.’

Peter Kubik, partner at UHY Hacker Young, comments: “New proposals do not get to the root of the problem as large businesses could still operate with lengthy payment terms.”

“At present, there is no hard and fast definition of what ‘unfair’ payment terms are so a lot of businesses at the top of the supply chain could operate with 90-day terms. This can be tough on SMEs who have tighter margins.”

“If these proposals go as far as explicitly defining how many days is too long to pay suppliers and what constitutes unfair or even grossly-unfair payment practices, then this will push real change.”

In the last six months, the Small Business Commissioner has clawed back £3.1m in late payments for small businesses from 52 complaints it received. This compares to the previous six months when just £380,000 was repaid from 30 received complaints.

Peter Kubik added: “Whilst a deterrent for businesses, these fines do little to help recipients of late payments. For those small businesses who have already waited three months to get paid, the damage has already been done.”

“There is also the worry of whether the fines will be substantial enough to deter large businesses from delaying payments to suppliers. The new approach relies on large businesses to self-report their payment practices and this will need to be closely monitored.”