Seeking to support UK small-to-medium businesses, UK Chancellor Philip Hammond has announced that the Treasury Department, will crackdown on the practice of late payments to small enterprises.
Presenting the UK’s ‘Spring Statement’, Hammond outlined that the Treasury would take ‘definitive action to end the scourge of late payments on small businesses’.
In his decision, Hammond points to a Treasury research paper, which had provided evidence that late payments had contributed to 50,000 UK small businesses closing per year.
Moving forward the Treasury will enforce a stricter code for how larger UK registered businesses interact and engage with SMEs – focusing on eliminating deliberate late transactions which impact smaller suppliers.
In its auditing of companies, the Treasury may demand that larger enterprises disclose all transactions with SMEs, with Hammond further detailing that governance audit committees will be forced to review corporate SME payment procedures ensuring compliance.
Hammond’s SME mandate has been backed by FSB national chairman Mike Cherry “Poor payment practices by big businesses towards their smaller suppliers are rife and pernicious, leading to the closure of 50,000 small firms a year.
“Four out of five small businesses have been paid late, and we told the chancellor that today was the moment to act, to tackle this scourge once and for all.”
Providing evidence to the Treasury, the FSB has previously detailed that four out of five small businesses were paid late, with SMEs on average owed £6,142.
Bacs Payment Schemes, which handles interbank transactions, said the country’s 5.7 million SMEs were owed about £13bn in total. More than a third of small businesses say big companies have extended their payment terms in the past two years.