Government Announces Radical Changes to End Poor Payment Policies
Business minister Matthew Hancock unveils amendments to Prompt Payment Code which will make 30 day terms standard
Government backed changes to the Prompt Payment Code (PPC) were declared today (Feb 16) by business minister Matthew Hancock in order to bring an end to the poor payment practices that largely affect small and mid-sized businesses.
PPC will make 30 day payment terms the agreed standard, with businesses who sign the code committing to a 60 day limit. More than 1,700 companies and public authorities have accepted the principals so far. The strengthened code will also mean that large companies will have to publish their payment terms, increasing transparency and empowering small firms.
The new laws will be monitored by the new Code Compliance Board (CCB), which is made up of members of various business representative organisations. The CCB will investigate challenges made against the signatories of the PPC and will have the power to remove participants who fail to follow it.
Hancock, who announced the news to manufacturing organisation the EEF, emphasised the importance of the code’s adoption and the effort he has made to ensure large firms comply with it, stating that he has “written to the FTSE 350 urging them to sign up”.
The statement follows on from a cross-party roundtable, which was held in parliament by the Federation of Small Business (FSB) in order to confront poor payment issues suffered by small and medium enterprises, including supply-chain bullying.
Phil Orford MBE, chief executive at the Forum of Private Business, welcomed the news:
“No small business should have to wait for an unreasonable length of time to be paid. We welcome that the government recognises that more than 60 days is unreasonable in most circumstances. It is fundamentally unfair that small businesses are being used as a line of credit for larger organisations and propping up big business, and the government’s moves to provide much needed teeth to the Prompt Payment Code are what many small business suppliers have wanted to see.
“The fact that some signatories continue to operate payment terms of as much as 120 days is yet another example of the supply chain abuse that threatens to break the backbone of the British economy – small businesses. The need for further action from policy makers to fix the broken big business ethics culture in the UK is fundamentally clear.”