by Sophie Hutchings

On 19 September 2024, the government unveiled new measures to deliver on the Labour manifesto pledge to tackle the rise of late payments affecting small businesses and the self-employed.

Small businesses have long been calling for rules to clamp down on late payments of invoices, the Labour Government said.

Sir Keir Starmer said is “one of the biggest reasons businesses collapses”.

This issue is costing small businesses £22,000 a year on average, and estimated 50,000 business closures a year, according to the Department for Business & Trade (DBT) and research from the Federation of Small Businesses.

So, what do they plan on doing? A new Fair Payment Code has been announced, this will replace the old Prompt Payment Code. This will be open to signatories this autumn. Businesses will be awarded either gold, silver or bronze status in regards of their payment standards.

New legislation will also be brought into effect in the coming weeks, this will make sure that large businesses include payment reporting in their annual reports. This is intended to increase the transparency of their treatment of smaller firms, and therefore hold them more accountable. Aswell as this, enforcement will be stepped up on the existing late payment performance reporting regulations, which require large companies to report their payment performance twice yearly on the government website.