Confirmation that the government will be introducing The Small Business Protections (Late Payments) Bill in this parliament have been welcomed by industry trade bodies. As well as introducing maximum payment terms of 60 days and mandatory interest of 8% above Bank of England base rate on late payments, the Bill will also seek to ban the practice of deducting and withholding retention payments under construction contracts.
Responding to the announcements on Wednesday’s King’s Speech, BESA’s director of legal and commercial Debbie Petford said: “This is a historic day in our long battle against late payment and regressive practices in construction. There have been a series of voluntary codes of conduct and pledges from big businesses to mend their ways over the years, but we always felt that only proper, targeted legislation would really get to grips with the problem.
“Late payment and retention clauses in contracts lead directly to business failures, job losses and poor quality buildings that directly impact health, wellbeing and safety.”
She said it was now crucial that the government kept up the momentum and moved to a second reading of the Bill so that it could become law and start providing protection for thousands of hard-pressed firms struggling to cope with a series of challenges in the current economic environment.
Other provisions in the Bill include forcing persistently late paying companies to publish details of their payment practices and intended actions to address them. It will also give the Small Business Commissioner new powers to investigate and potentially fine businesses suspected of persistent poor payment and adjudicate disputes between businesses outside the court process.
“The government made this a key manifesto promise because of the regressive impact this has on employers all over the UK,” said Petford. “Late and unfair payment undermines business confidence and investment so this Bill can play a significant role in driving economic growth.”
SNIPEF has also added its support for the Bill, but has warned that any changes should not simply replace one burden with another. Chief executive Fiona Hodgson said: “The plumbing and heating industry, and the wider construction sector, have waited a long time for meaningful reform in this area, and stronger protections for smaller businesses are overdue. However, reforms must be practical, proportionate and avoid creating costly or complex alternative arrangements that could disproportionately impact SMEs and specialist contractors.
“Improving payment certainty and fairness across the supply chain is critical, but the detail of implementation will determine whether these reforms genuinely support smaller businesses in practice.”
