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New powers for business groups to tackle late payment

By CreditMan Thursday, February 5, 2015

New proposals to give business groups further powers to challenge unfair payment terms and practices on behalf of their members have been unveiled recently (3 February 2015).

The government is bringing in tough new laws and bulking up existing codes of practice to tackle the issues of late payment and other unfair payment practices. The measures include:

  • consulting on ways to tackle poor payment practices, such as by giving representative bodies greater powers to challenge grossly unfair payment terms and practices
  • leading by example on public sector procurement
  • new laws to increase transparency on the payment practices of large and listed companies and help change corporate payment culture
  • toughening up the Prompt Payment Code
  • giving the Groceries Code Adjudicator the power to fine supermarkets for breaching the Groceries Supply Code of Practice

Representative bodies such as the Federation of Small Businesses (FSB) have played an important role in raising the profile of payment issues.

Giving these organisations further powers to challenge unfair payment terms, on behalf of their members, could give small businesses more confidence to speak out against the poor practices of their larger customers.

Business Secretary Vince Cable said recently:

Large companies using their economic might to impose unreasonable terms on their suppliers causes real problems for small businesses. It is a significant issue and there is agreement that we need to keep the pressure up to bring about real change.

This is about making the UK a fairer and more trusted place to do business.

Business Minister Matthew Hancock said recently:

Small businesses are the economic backbone of the UK, but some large companies are squeezing the life out of them by imposing unreasonable payment terms. This behaviour must stop, once and for all. I want to pay tribute to the efforts of the FSB in highlighting these payment practices and for working with us to start stamping them out.

Greater transparency is key and we are setting an example in government, by committing to paying 80% of our invoices within 5 days, with a maximum of 30-day terms on all public sector contracts.

The Recently consultation on widening the powers available to representative bodies to challenge grossly unfair terms and practices in relation to late payment covers:

  • who might be covered by a representative claim (individual businesses or groups of businesses)
  • which organisations can bring a claim
  • options for dispute resolution
  • the resources available to bring a case
  • whether to further refine the definition of ‘grossly unfair’ payment practices

The announcement follows a Downing Street summit on payment practices, co-chaired by Matthew Hancock and Sir Win Bischoff, Chairman of the Financial Reporting Council. Attendees also included representatives from FTSE 350 and international companies, as well as suppliers and small businesses.