Government takes action to back small businesses and tackle late payments

Department for Business & Trade Sign

Small businesses are a critical part of the UK economy – from cafés and pubs that serve as community hubs through to the expertise found in small technology-based companies. In many cases, late payment and long payment terms are acting as a constraint on growth. A key drive for the government is make the UK the best place to start and grow a business, with a strong payment culture. 

The new Prompt Payment and Cash Flow Review takes action to increase the transparency of large businesses’ payment performance.  

The government will take action to increase the transparency of large businesses’ payment performance, by: 

  • Extending the Reporting on Payment Practices and Performance Regulations 2017 (the Regulations): Following consultation, Government will take forward legislation to extend payment performance reporting obligations. We will include new metrics for reporting, including a value metric, so businesses and commentators can see the value of invoices, including invoices paid late, and a disputed invoices metric. We will also introduce reporting on retention payments for businesses in the construction sector. 
  • Making it easier for external commentators to analyse the data by sector: By improving the payment reporting portal,2 where payment times of businesses reporting under the Regulations are published, and by introducing a new sectoral indicator to aid simple analysis. 
  • Increasing publicity: Through the Minister for Small Business, the Government will increase Ministerial messaging, including highlighting the work of those undertaking external analysis, including Good Business Pays and its award scheme. 
  • Ensuring the Payment Reporting data is reflective of real performance: By improving overall rates of compliance with reporting requirements through increased enforcement activity. 

In 2022, Small and Medium-sized Enterprises (SMEs) were owed on average an estimated £22,000 in late payments. This represents a significant cash flow challenge for small businesses – undermining opportunities to invest and innovate. Tackling late and long payment times through a range of measures will benefit UK businesses. A stronger payment culture will provide businesses with more predictable cash flow, making it easier to manage.  

Payment Practices and Performance Regulations have helped improve UK payment culture and transparency since its inception in 2017, with a recent review conducted to help improve late payment for small businesses, which remains a current widespread issue.  

Results from the review suggest further action needs to be taken including extending the scope of regulations, improve public awareness, provide more information for businesses and kick start an enforcement programme to improve transparency. 

A review of Non-Financial Reporting has also been conducted, which will consider how business annual reports can be improved. This will ensure that policies strike a balance, encouraging businesses to develop and maintain clear agreements on payment terms which give small businesses a fair deal. 

‘’I would like to thank the many businesses and individuals that took time to respond to our consultations. Particular thanks go to Enterprise Nation for hosting a number of stakeholder events and organisations including the Federation of Small Businesses, Good Business Pays, and others for their valuable input. I also want to thank the Small Business Commissioner and her team for their engagement throughout the process’’ – Kevin Hollinrake MP, Minister for Enterprise, Markets and Small Business.