PM vows to tackle late payments – Business news 19 September 2024
PM vows to tackle late payments – plus inflation, markets, insolvencies & more business news that we thought would interest our members.
James Salmon, Operations Director.
PM vows to tackle late payments
The Labour Government is set to consult on new measures aimed at holding larger firms accountable for their payment practices, which have been a long-standing concern for small businesses.
According to the Department for Business & Trade (DBT) and the Federation of Small Businesses, late payments cost small businesses an average of £22,000 annually and lead to approximately 50,000 closures each year.
Sir Keir Starmer stressed that “stamping out late payments” is central to the Government’s strategy to support small business growth. In the meantime, new regulations will require large companies to report their payment practices in annual reports, enhancing transparency and accountability.
The Government has released the following press release:
Crack down on late payments in major support package for small businesses
- New Fair Payment Code and fresh rules on company reporting and major consultation unveiled as part of package to tackle late payments
- Scourge of late payments costs SMEs £22,000 a year with 56 million hours of lost productivity across the economy – acting as a major brake on growth
- Comes as Business Secretary set to visit food and drink businesses in Manchester struggling with late payments
- The government has unveiled new measures today to support small businesses and the self-employed by tackling the scourge of late payments, which is costing small businesses £22,000 a year on average and leads to 50,000 business closures a year.
The government will consult on tough new laws which will hold larger firms to account and get cash flowing back into businesses – helping deliver our mission to grow the economy.
In addition, new legislation being brought in the coming weeks will require all large businesses to include payment reporting in their annual reports – putting the onus on them to provide clarity in their annual reports about how they treat small firms. This will mean company boards and international investors will be able to see how firms are operating.
Enforcement will also be stepped up on the existing late payment performance reporting regulations which require large companies to report their payment performance twice yearly on GOV.UK.
Under current laws, responsible directors at non-compliant companies who don’t report their payment practices could face criminal prosecutions including potentially unlimited fines and criminal records.
The consultation which will be launched in the coming months, will also consider a range of further policy measures that could help address poor payment practices.
Every quarter, 52% of small firms in the UK suffer from late payments, meaning roughly 2.6 million small firms face this issue, with the Federation of Small Businesses describing it as one of the biggest problems facing SMEs.
Late payments are just one element of the problem, with some SMEs forced to wait months for contracts to be fulfilled and some are even forced to take out loans against their own homes to manage cash flow.
Cracking down on late payments will unlock growth for 5.5 million small firms by enabling them to invest their time hiring more employees, boosting wages, and exporting around the world, rather than chasing down late payments.
The Business Secretary will hold a joint call with the Federation of Small Businesses later today to outline to SME leaders the work the Department will undertake to put in place tough new laws to end bad payment culture. New proposals, subject to consultation, will be bought forward on audit and audit committees, in order to help rebuild small businesses’ trust that they will be paid on time and to deliver on Labour’s manifesto commitment to tackle late payments.
Prime Minister Keir Starmer said:
We’re determined to back small businesses by unlocking their barriers to growth, and stamping out late payments is at the heart of this.
We know how important it is for business owners to have the peace of mind and certainty around their cashflow to keep their businesses alive. Late payments cost businesses tens of thousands of pounds and is one of the biggest reasons businesses collapse.
After years of delay, we’re bringing forward measures that small businesses have long been calling for to tackle late payments once and for all.
Business Secretary Jonathan Reynolds said:
Late payments are simply unacceptable and this government is determined to level the playing field for small business. When the cashflow runs dry, small firms go under which is why we need to hold larger business to account with their payment practices and foster an environment that supports growth and jobs.
Slashing trade barriers, reforming business rates, getting more SMEs exporting – this government is committed to small firms. We know there’s a lot more to be done, but today we are calling time on late payers once and for all.
A new Fair Payment Code has also been announced today replacing the old Prompt Payment Code, and will be open to signatories this autumn. Businesses will need to prove they have met good payment standards before being awarded official code status.
This will be designed to push businesses to pay faster more often, to be awarded either gold, silver or bronze status. The Code will also shine a light on those responsible businesses doing the right thing by their suppliers and small firms.
It comes as part of our wider work to support SMEs to help go for growth with reform to business rates, getting more small firms exporting and our new industrial strategy. The Secretary of State and Small Business Minister Gareth Thomas will discuss the new measures with small businesses later today.
Small Business Minister Gareth Thomas said:
Small businesses deserve to be paid on time, it’s as simple as that. I’m optimistic that today’s first big step will help pave the way for real change that supports SMEs to thrive and help to grow our economy.
New research published by the Department for Business and Trade has found payment problems multiply the further down the supply chain you go. With delays to payments increasing with each business along a supply chain, this results in smaller businesses generally experiencing more issues with late invoices than larger firms.
These new findings underpin the need to move quickly to crack down on late payments. The research also found that there was a clear imbalance between big and small firms, and that administrative errors are a major factor in creating slow payments with 24% of firms saying that invoices being incorrectly handled added to delays.
The government will work closely with small and large businesses as well as groups such as FSB and Enterprise Nation to discuss what further measures can be considered to crack down on late payments while ensuring we strike the right balance and avoid excessive burdens on businesses.
Tina McKenzie, Policy Chair at the Federation of Small Businesses (FSB), said:
This is what real change looks like. Listening to small firms and prioritising action to tear down each and every barrier to growth.
The Business Secretary has clearly recognised the importance of eradicating bad payment culture, which so devastates the UK supplier base and holds back growth. This series of actions today – including the crucial steps being taken to deliver on Jonathan Reynolds’ commitment on audit committees – shows the Government is rightly focused on delivery and working in partnership with the business community.
There will be so many decisions the Government needs to get right, early – an actively pro-small business budget, a good industrial strategy and tackling late payment. Announcing this programme of work today is a huge confidence boost for the small business community and a clear signal the new Government intends to stand up for small firms.
The Small Business Commissioner, Liz Barclay, said:
I am delighted to announce a new Fair Payment Code will be launched this autumn. The new code will reward businesses that treat their suppliers fairly and pay them quickly. It will also include an ambitious new Gold Award which aims to make 30-day payments the new standard for which businesses can aim.
We need sustainable, resilient businesses at all levels of the supply chains, to achieve the growth the economy needs. That means paying everyone from the largest supplier to the sole trader quicker, so they have the confidence to invest, improve productivity and grow. Fair payment terms and on time payments are the key.
Steve Hare, CEO of Sage, said:
Late payments continue to challenge small and medium-sized businesses, affecting cash flow and growth. The UK Government’s new measures are all positive and show a strong commitment to addressing this issue. We must also focus on technological solutions. E-invoicing, for instance, already used in other countries, reduces late payments by 20% and processing times by 44%, saving small companies an average of £11,300 annually.
Oliver Lloyd-Taylor, Founder of Black Milk, which has a Manchester-based café and sells award-winning pistachio & hazelnut spreads, said:
As a company we have experienced firsthand the sequential impact of late payments to our daily cash flow – which has, at times, lead us to be late with payments ourselves. We welcome the steps that the Government is making today to help protect small businesses, especially safeguarding them from larger businesses being able to utilise smaller businesses as an overdraft facility.”
Kenny Goodman, co-founder of drinks company Hip Pop said:
Late payments can significantly impact small businesses like ours, especially when it comes to maintaining strong relationships with our suppliers. When we’re paid on time, we can ensure we do the same for those we work with, which is vital to keeping everything running smoothly.
Terry Corby, Founder & CEO of campaign group Good Business Pays said:
On the same day that Good Business Pays published our Autumn 2024 Watchlist of Late & Slow Paying companies, it’s encouraging to see these new late payment measures being announced.
Only reputational pressure from organisations like Good Business Pays, supported with appropriate legislation and enforcement from government, will force a change in late payment behaviour. These new measures announced today will go some way to help drive that culture change.
https://www.gov.uk/government/news/crack-down-on-late-payments-in-major-support-package-for-small-businesses
CPA’s reaction – James Salmon – Director says:
While we at CPA support any measures that encourage payment on time, we do not think reporting requirements go far enough. Most big companies know that small suppliers will be unable to turn down their business regardless of their payment reputation. And that’s if the supplier even checks whats been reported. How many small suppliers will really check the payment reporting before accepting an order?
CPA has long argued that the only way to tackle late payments is to hit late payers in the pocket. And thats all late payers. Not just the big companies. Most late payments are from fellow SME’s!
So long as paying your suppliers late is the easiest and cheapest way of boosting your cash flow, then businesses will continue to push late payments as much as they can.
if it is made expensive and onerous, businesses will switch to other forms of boosting their cash flow.
Late payment compensation was brought in decades ago but it hasn’t moved with inflation. Government should increase the rates to truly compensate businesses for late payment. Make it easier to claim. And they could even obligate companies to pay it when they are late.
Government could also tighten up acceptable payment terms. They could force companies to report their late payment liability in their accounts.
CPA has been helping small suppliers recover compensation from former customers who were late payers.
Would you like to recover the compensation your business is due?
Just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
Other news
Inflation holds steady ahead of rates decision
Inflation in the UK remained unchanged at 2.2% in August, according to the Office for National Statistics (ONS), aligning with economists’ predictions. However, core inflation increased to 3.6%, up from 3.3% in July. The Bank of England, which recently cut rates for the first time since the pandemic, is expected to proceed cautiously due to ongoing inflationary pressures. With regular pay growth exceeding 5% and unemployment at 4.2%, the labour market remains tight. The Bank’s forecasts indicate inflation could rise to just under 3% by year-end as the impact of lower energy prices diminishes.
Pandemic drove up youth unemployment crisis
The number of young people out of work due to long-term sickness has surged by 29% since the pandemic, reaching approximately 237,000, according to the Department for Work and Pensions. Around 600,000 16 to 24-year-olds are unemployed, 63,000 more than before 2020. Alison McGovern, the employment minister, said: “The lockdown generation has been failed, consigned to the scrapheap, because they have been denied the support and opportunities to find work, get into work, and get on at work.” She went on to announce plans for a youth guarantee aimed at providing work, apprenticeships, and skills training to those in need.
Markets
Yesterday, the FTSE 100 closed down 0.68% at 8253.68 and the Euro Stoxx 50 closed down 0.52% at 4835.30. Overnight in the US the S&P 500 fell 0.29% to 5618.26 and the NASDAQ fell 0.31% to 17573.30.
However stocks have start to rally across the globe on expectations the Federal Reserve’s half-percentage-point interest-rate cut announced last night will guide the world’s largest economy toward a soft landing.
This morning on currencies, the pound is currently worth $1.325 and €1.188. On Commodities, Oil (Brent) is at $74.5 & Gold is at $2583. On the stock markets, the FTSE 100 is currently up 0.9% at 8329 and the Eurostoxx 50 is up 1.15% at 4891.
AIM faces disaster if tax relief removed
City analysts warn that the London AIM market could suffer “irrecoverable damage” if Labour removes the inheritance tax relief on junior market stocks. Chancellor Rachel Reeves is rumoured to be considering this change in the upcoming Budget, which could lead to a significant market crash for small companies. The potential removal of this tax break could result in a loss of £14bn to £20bn in investor value, with 15% of AIM’s total cash possibly vanishing overnight. Amisha Chohan from Quilter Cheviot stressed that the tax relief has been “instrumental in supporting UK small- and medium-sized growth companies.” The Institute for Fiscal Studies estimates that scrapping the relief could raise £1.1bn this year, but the negative economic impact could offset this gain.
Reform needed to save AIM
London’s Alternative Investment Market (AIM) is experiencing significant challenges, with the number of listed companies falling to just 610, a decrease of 88 from the previous year. The average market capitalisation of AIM firms has also shrunk to £111m, reflecting an 11% decline. Charles Hall, head of research at Peel Hunt, stated: “Doing nothing is not an option,” as he advocating for a “fundamental review” to rejuvenate the market. The decline is attributed to aggressive fund outflows, excessive corporate governance requirements and a high cost of being listed. Peel Hunt has proposed various reforms, including using the Government’s £5bn stake in NatWest to establish a National Wealth Fund and increasing tax incentives for domestic investments.
Fed makes first rate cut since 2020
The US Federal Reserve has reduced interest rates by 50 basis points, marking the first cut since 2020, with the federal funds rate now between 4.5-5.0%. The Fed stated: “The economic outlook is uncertain, and the committee is attentive to the risks to both sides of its dual mandate,” highlighting its commitment to employment and inflation targets. The decision followed a jobs report indicating rising unemployment and slowing job growth, raising concerns about a potential economic downturn. Officials predict the unemployment rate could rise to 4.4% by year-end, while inflation has decreased to 2.5%, its lowest since February 2021. The Fed’s move comes just before the Bank of England’s interest rate announcement, with expectations of rates remaining unchanged.
Investors could spike bond market to take down Trump – Vance
JD Vance, a vice presidential hopeful, has expressed concerns that activist investors may attempt to undermine Donald Trump’s potential second term by manipulating US bond markets. In an interview with Tucker Carlson, Vance stated: “I really worry…do the bond markets…try to take down the Trump presidency by spiking bond rates?” He drew parallels between the current situation and Liz Truss’s brief premiership, stating: “I like Liz Truss. I disagree with her on a lot of issues…but look, she came in, she had a plan and the Bank of England I think made a lot of mistakes – maybe intentional – interest rates shot through the roof and it took down her government in a matter of days.” Vance explained: “It would be devastating to the president if you had this bond market death spiral.”
Rachel Reeves orders crackdown on government use of consultants
As the Chancellor moves to halve spending on external contractors, Rachel Reeves has said all major new Whitehall consultancy contracts must be signed off by a senior official or a cabinet minister.
Pension age rise sparks concern
The UK state pension age is currently 66, with plans to increase it to 67 between 2026 and 2028, and to 68 between 2044 and 2046. However, the London School of Economics’ Centre for Economic Performance has suggested advancing the rise to 68 “as soon as possible.” Mark Screeton, CEO at SunLife, says this change could severely impact those with little or no private pension savings, stating: “One in four (24%) of retired people are coping on the state pension alone.” He highlights that the current state pension of £11,502 falls short of the £14,400 needed for a minimum standard of living and argues that any increase in the pension age should not occur before 2044, when auto-enrolment in pensions will have been established for over 30 years.
Eurozone Inflation falls
Eurozone Inflation fell to 2.2% in August, down from 2.6% in July and matching market forecasts. It marks the lowest rate of year-on-year inflation in the bloc since July 2021, setting the stage for an escalation of the European Central Bank’s monetary-easing policy. Services and food and alcohol contributed the most to inflation, adding 4.1% and 2.3% respectively, but this was offset by lower energy prices.
Ocado
Ocado has upped revenue guidance to double digit percentage growth after reporting revenues of £658m for the three months ending 1st September. The board said average orders per week rose 14.7% to 437k.
Reckitt Benckiser
Reckitt Benckiser is said to have started talks for the sale of its homecare assets including Cif, Airwick and Cillit Bang for approx £6bn.
Next
Next said it made £452m in pre-tax profit up 7.1% on sales of £2.946bn up 8%. However its board said 2024 had started to feel like a new phase in Next’s development and it anticipates 9.7% growth in EPS with growth coming from overseas expansion, new brands and third party licences.
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Why you should become a member of CPA!
The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid, since 1914. We have supported our members through all sorts of difficult trading environments. With high interest rates and a struggling economy and elevated insolvencies, our services can help your business navigate these difficult waters.
Unlike other credit management and debt collection companies, we offer a range of services to our members that are all included as part of a fixed annual subscription, tailored to your needs.
Under your annual subscription you will have access to our main services:
- Our Creditcare credit reports provide credit ratings and limits along with a host of detailed information on your potential customers to enable you to trade with confidence and set appropriate credit policies for new customers.
- Our monitoring service will alert you to any significant changes in the status of those customers.
- Our Overdue account recovery service can be used to chase up payment on any invoices to those customers that have not been paid on time. Unlike other debt collection companies, this service directs your customer to pay direct to you and allows you to maintain your goodwill with them, rather than inserting ourselves into your relationship with you customer and insisting they pay CPA instead. Our Overdue account recovery service resolves over 80% of accounts referred to us.
All of the above services and other complimentary services such address verification, are included in your subscription!
And for the small minority of debts not resolved through our Overdue account recovery service, you can refer the debt to our collections department to escalate the late payment collections process.
CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. And we provide credit information so you can monitor and assess your key customers and be warned of any potential risks. CPA has been improving business cash flow for over 100 years, by tackling late payers and campaigning against the late payment culture in the UK.
Unlike other credit management companies, we offer our members a fixed annual subscription regardless of how high the value of their debts maybe!
Rather than to borrowing more money to improve your cashflow, CPA suggests that business owners tackle the problem at its source. If late payments are a strain on your cashflow, then talk to CPA about how we can help you reduce those late payments.
Just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
When you see your money come in, you will be so glad you used CPA.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you have a commercial late payer that is causing you grief? Use CPA’s no-win, no-fee, commercial debt recovery service!
If you have a particular business customer who is late paying and causing you sleepless nights, why not offer it to CPA’s collection department for purchase on recourse?
CPA’s collection department will then pursue the debt. We will be liable for any costs incurred and then when we have recovered the debt, we will pay you the net principle debt recovered less our percentage.
Once you have enjoyed that success then you can consider the more cost effective membership which includes our Overdue Account Recovery service and Status/Credit reports as well as a range of other complimentary services.
Just call 020 8846 0000 and ask for Godfrey Nelson or Cris Shirley (business hours) or email debtpurchase@cpa.co.uk today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
Maybe you no longer work with them. Under legislation, you are entitled to compensation you for those late payments you have suffered.
You put up with the PAIN – now claim the GAIN!
Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
CPA (LPC) Recoveries is using our bespoke software and decades of experience to do just that for our clients
Check our compensation calculator to see how much your business could be owed!
Discover NOW the potential value of late payment compensation hidden in your sales ledger!
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.