26 February 2015
Big companies should pay small suppliers in 30 days, the Department for Business Innovation and Skills (BIS) says.
To enforce this 30-day payment term, the UK government has strengthened its Prompt Payment Code as part of its tougher reporting laws in the Small Business, Enterprise and Employment Bill.
The Prompt Payment Code promotes 30-day payments as the standard, with a 60-day maximum limit. This will be rigorously enforced by the new Code Compliance Board, which will include people from business representative bodies who will investigate challenges made against signatories to the Code by their suppliers. The Compliance Board will remove signatories found to be in breach of the Code’s principles and standards.
According to BIS, the Prompt Payment Code sets out fair and agreed practices for businesses to follow when dealing with, and paying, their suppliers. More than 1,700 businesses and public authorities have so far committed to these principles, which include paying suppliers within an agreed timeframe and communicating with them effectively.
Businesses will be actively encouraged to start complying with the strengthened Prompt Payment Code in the coming weeks. The changes complement the tougher reporting laws in the Small Business, Enterprise and Employment Bill. These new laws will force the UK’s largest companies to publish their payment terms, increasing transparency and empowering small businesses.
The Code Compliance Board will be able to use this data to review the status of signatories to the Code and challenge those that either do not pay their suppliers promptly or insist on excessively long standard terms.
Business Minister Matthew Hancock said: ‘Making small businesses wait an unreasonable time for payment is entirely unacceptable. I know first-hand the great burden that late payment can place on firms – and how it can strain family finances – which is why I am committed to stopping it.
‘Big companies should lead by example and pay small suppliers within 30 days. I have already written to the FTSE 350 urging them to sign up to the Prompt Payment Code.’