Crackdown Unveiled In Plan To Back Small Businesses
Small businesses across the UK will benefit from the most comprehensive support package in a generation, as the government launches a bold new plan to give small businesses the tools to thrive and drive economic growth as part of its Plan for Change.
Small and medium sized firms employ 60% of the country’s workforce and generate £2.8 trillion in turnover, but are held back by late payments and not getting the financial backing they need within a wider system that hasn’t worked in their favour.
Now the government is set to unveil a significant package of reforms in a generation to tackle late payments, with plans to introduce the toughest laws on late payments in the G7.
The new laws are set to give stronger powers to the Small Business Commissioner to empower them to wield fines, worth potentially millions of pounds, against the biggest firms who persistently choose to pay their suppliers late.
The Small Business Commissioner will be given new powers to carry out spot checks and enforce a 30-day invoice verification period to speed up resolutions to disputes. The upcoming legislation will also introduce maximum payment terms of 60 days, reducing to 45 days, giving firms certainty they’ll be paid on time.
Audit committees, under the proposals, will also be legally required to scrutinise payment practices at board level, placing greater pressure on large firms to show they’re treating small suppliers fairly backed by mandatory interest charges for those who pay late.
These changes are also intended to save small businesses valuable time, freeing up hours currently spent chasing overdue invoices so they can focus on growing their business instead. Taken together, this will help ensure businesses are paid on time and end the scourge of late payments which costs the UK economy £11bn per year and closes down 38 UK businesses every day.
Small Business Minister Gareth Thomas said:
“I want the UK to be the best place in the world to start a business, grow and succeed – and that’s why we’ve taken bold steps today.”
“Too many small firms go under each year because they aren’t paid on time – that is completely unacceptable.”
“I hear all too often about businesses who just don’t have the cash needed to start up or grow. Today, we’ve announced measures as part of our Plan for Change to tackle all of those issues and beyond. This is the government listening to businesses, working with them, and delivering real change.”
Michael Kill, CEO of the Night Time Industries Association (NTIA) Said:
“The Government’s commitment to tackling late payments through the toughest reforms in 25 years is a long overdue intervention and a critical step forward for the UK’s small businesses. For the night time economy, home to thousands of SMEs in music, hospitality, and culture, late payments can be a matter of survival. We lose 38 businesses a day to this issue. That’s not just economic loss, it’s cultural erosion.”
“We welcome the new powers proposed for the Small Business Commissioner, mandatory interest charges for persistent late payers, and increased board-level accountability. These are bold steps, but the devil will be in the detail. Strong enforcement and clear, accessible mechanisms for SMEs will be vital to success.”
“But this action must be coupled with wider reforms around the regulatory framework, business rates, and broader economic policy. Only then will we begin to rebuild genuine confidence across the small business community.”
“These announcements show intent, but we now need to see that intent translate into real, tangible outcomes for businesses at the coalface.”
“Promises alone are no longer enough. This must drive meaningful change on the ground.”
Policy Chair of the Federation of Small Businesses (FSB), Tina McKenzie, said:
“Making sure businesses are paid on time, that our high streets thrive, and creating conditions in which everyone can start and succeed in business are crucial priorities for small businesses, communities and the economy. It’s very welcome that the Prime Minister has today made them his Government’s priorities.
“I’m pleased that FSB and the Government have been able to work in lockstep on the bold and ambitious measures needed to tackle the scourge of late payment through legislation, and other pro-growth, pro-small business measures.”
“Today’s plan is an encouraging commitment from the Government to take the side of small businesses in the great growth challenge ahead.”
As part of the plan, the government is also tackling another major barrier for small businesses – access to finance. Despite the UK’s world-leading financial services sector, many small firms struggle to secure the funding they need to invest, expand, or even survive.
To address this, the Government is launching a new £4 billion wave of financial support aimed at boosting growth and supporting more small businesses to start up and grow. This includes a £1bn boost for new businesses, with 69,000 Start-Up Loans and mentoring support to inspire the next generation of entrepreneurs and small business owners.
The Government is also going further by delivering a new £3 billion boost to the British Business Bank – raising the total guarantee to £5 billion – to help lenders offer more small business loans through the ‘ENABLE programme’. Under the scheme, the BBB provides a government-backed guarantee to help lenders feel safer when lending to smaller or newer businesses, enabling them to offer better loan terms including with lower interest.
The government added: “Accelerating SME growth by just 1 percentage point per year, could deliver £320bn to the UK economy by 2030.”
“All of these measures announced today back small businesses to the hilt and build on action already taken by this government to create the conditions for businesses to thrive”:
- Slashing of red tape to boost the hospitality and arts sector through hospitality zones and licensing reforms following the Licensing Taskforce co-chaired with Nick Mackenzie, Greene King CEO
- High Street Rental Auctions to fill vacant high street premises
- A revamped Board of Trade to get more small firms exporting around the world
- The new Business Growth Service to ensure SMEs have access to key support
- We’ve set out that we intend to introduce permanently lower business rates multipliers for the hard-hit retail, hospitality and leisure sector.