Prompt payment and the Small Business Commissioner – government asks for views

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05 November 2020

The issue of prompt payment – or more precisely late payment - has been one that has raised its head many times over the last few years. It was one of the issues considered pivotal to address after the collapse of Carillion, alongside better social value application, improved procurement practices and better supply chain treatment, especially of SMEs. A few government consultations have taken place since, including the Department for Business, Energy and Industrial Strategy (BEIS) Prompt Payment Code survey, which sought views on how to reform the Code. 

Administration of the Prompt Payment Code has been transferred to the Office of the Small Business Commissioner (SBC-Philip King) and following the survey on the Code’s reform, BEIS is now seeking views on increasing and widening the scope and powers of the SBC to assist small businesses by providing them with effective mechanisms for redress, in respect of late payments. 

The SBC would potentially gain powers to activate enforcement mechanisms against: 

  • businesses who do not comply with information requests. The consultation asks whether the Commissioner should have the power to enforce non-compliance with their information requests, such as through court orders and/or financial penalties 

  • businesses who are found to have poor or unfair payment practices towards small businesses. The consultation explores whether sanctions should be imposed by the Commissioner under certain specific circumstances. These sanctions could include undertaking of binding payment plans and financial penalties where payment fails to take place. 

The consultation is also seeking views on extending the Commissioner’s: 

  • scope to consider complaints by small businesses about other small businesses 

  • power to investigate specific instances of suspected poor or unfair payment practices at their own initiative or following receipt of a complaint from a third party 

  • power to carry out a review on the effect of relevant legislation, policies and practices on small businesses, following an instruction by the Secretary of State. The review need not be limited to payment matters and may consider other issues which affect small businesses. 

IWFM is intending to submit a response to the consultation, which closes on 24 December 2020, welcoming the proposals overall. We will focus on two key points, which we are integrating in other policy and guidance areas as well: 

  • maximum payment terms should be 30 days only, which would mean the payment terms under the Prompt Payment Code should be halved 

  • the SBC should have the powers to impose financial penalties on those who persistently fail to pay 95% of invoices within 30 days.  

Any member wanting to share their thoughts on the consultation, please get in touch with us via: policy@iwfm.org.uk   

 

The consultation can be found here