MPs want compulsory late payment code

A new campaign aimed at tackling late payments has secured cross-party support in Westminster with calls for a compulsory late payment code.

Thousands of  businesses collapse every year because of cash flow problems caused by late payments.  Thousands more are unable to  invest or grow because they have not payed what there are due on time.

Politicians have backed calls for the prompt payment code to be made compulsory in a bid to crack down on late payments to small businesses.

The Association of Accounting Technicians, whose 4,250 licensed members provide tax and accountancy services to more than 400,000 SMEs, has made three recommendations:

  • The Prompt Payment Code should be made compulsory for companies with more than 250 staff 
  • Payment terms should be halved from a maximum of 60 days to a maximum of 30 days
  • A clear, simple financial penalty regime for persistent late payers should be introduced and enforced by the Small Business Commissioner

Senior politicians from the Conservative, Labour, SNP and Green parties have come together to back the calls for reform and place additional pressure on the UK government to take long overdue action.

Conservative Sir Graham Brady, MP for Altrincham & Sale West and chairman of the 1922 Committee, said: “Prompt payment is essential for most businesses but particularly SMEs who often suffer real problems when not paid in a reasonable timeframe. The reforms suggested by AAT appear to be a good solution to this longstanding problem.”

Alan Brown (pictured), SNP MP for Kilmarnock and Loudoun and Spokesperson for Transport, Energy & Infrastructure, said: “I’m fully supportive of AAT’s calls to make the prompt payment code compulsory for larger companies, especially construction companies. Too many of these big organisations use the withholding of payments to SMEs to bolster their cash flow, as was the case with Carillion.”

Green Party MP for Brighton, Caroline Lucas, said: “Big businesses have had a chance to get their act together and pay their suppliers on time – but it’s clear a voluntary code isn’t working.

“The Government should be supporting and encouraging the smaller companies that provide so many jobs and much-needed innovation. Ministers must urgently introduce a compulsory Prompt Payment Code with strong financial penalties to force larger firms to pay for services in 30 days or less.”

Labour MP for Bury North, James Frith, added: “The collapse of Carillion and subsequent damaging impact on SMEs demonstrated the urgent need to reform the Prompt Payment Code. The AAT has proposed three very sensible recommendations which I support, and which should be given serious consideration by the Government.” 

Labour’s former Shadow BEIS spokesperson Lord Stevenson of Balmacara has added his support to calls for reform, stating: We have repeatedly tried to persuade the Government to sort out the late payment scandal and highlighted the ineffectiveness of the existing voluntary Prompt Payment Code. ”

What is the code? – The Prompt payment code

1. Pay suppliers on time

Within the terms agreed at the outset of the contract

Without attempting to change payment terms retrospectively

Without changing practice on length of payment for smaller companies on unreasonable grounds


2. Give clear guidance to suppliers

By providing suppliers with clear and easily accessible guidance on payment procedures

By ensuring there is a system for dealing with complaints and disputes which is communicated to suppliers

By advising them promptly if there is any reason why an invoice will not be paid to the agreed terms


3. Encourage good practice

By requesting that lead suppliers encourage adoption of the code throughout their own supply chains

Visit the website and become a supporter to show your support for late payment legislation.

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