Under the proposed legislation, the Small Business Commissioner, a role established under the , would be given new powers to investigate, adjudicate and fine. They would be able to investigate businesses suspected of poor payment practices or inaccurately reporting payment performance, and be given the power to adjudicate payment disputes outside of the court process. Finally, they would be able to fine businesses, including 鈥榮ignificant鈥� fines, in the order of tens of millions, for large companies that persistently pay their suppliers late or fail to comply with late payment legislation.
In plans developed with the Federation of Small Businesses, the government says it will give the commissioner the power to require late-paying large companies to publish explanations for poor payment performance and the actions they are taking to address it.
Other changes under the proposed legislation build on the 1998 Late Payment of Commercial Debt Act, and would include a 60-day cap on payment terms for large firms paying small suppliers. They would also impose mandatory interest on late payments, at 8% above the Bank of England base rate, and insist that this is included in contract terms.
In the construction sector, the withholding of retention payments would be banned. This would, the Department for Business and Trade said, prevent small firms losing retentions to insolvency or non-payment.聽The implementation of this proposal will, the department said, be subject to further consultation.
Rico Wojtulewicz, director of policy and market insight at the National Federation of Builders commented on the retentions proposal, saying: 鈥淔or construction, the main challenge will be the ban on retentions. Retentions are used to ensure performance, compliance and completion, but we understand why the government鈥檚 hand has been forced by unscrupulous businesses abusing them to pay less and/or balance shaky accounting.
"We therefore thank the government for hearing our recommendation to further consult on the ban鈥檚 implementation. This period creates breathing room for adjustment and offers time to progress alternatives, such as accessible surety bonds or insurance."
Peter Kyle, business secretary, said, 鈥淔ar too many businesses are forced to shut down because they have not been paid 鈥� that is simply unacceptable. We are unveiling the strongest, most robust changes to payment laws in over a generation 鈥� laws that will transform the fortunes of small businesses for years to come and make their day to day lives much easier.鈥�
Small business commissioner Emma Jones, said,聽鈥淲e are on a mission to make life easier for small firms by getting money moving faster through the economy by tackling聽late payments. The measures the Government has announced today will strengthen the role of my office in taking on the worst payers alongside ensuring small businesses have a stronger voice on payment terms and聽late payment聽interest. These reforms will reduce the hours spent chasing debt allowing small businesses to focus on more productive and enjoyable growth."聽