Draft legislation to deal with late payments
Late payment is crippling small businesses while the UK economy is crying out for investment. By failing to tackle late payment we are starving our small businesses of the capacity to act. The recent huge escalation in outstanding payments shows that decades of promoting ‘culture change’ has only made things worse. This bill will tackle the issue once and for all with a package of measures that is operable, impactful and measurable.
Labour peer Lord Mendelsohn has introduced draft legislation this week to help to rid the construction industry of the scourge of late payment.
In 2018 Conservative MP Peter Aldous put forward a bill known as the ‘Aldous bill’ to protect subcontractors from consistent late payment; being a former surveyor himself, his goal was to reform the practice of withholding retention payments by putting the money into a third party trust. During this time however, delays blamed on the amount of parliamentary time debated on Brexit meant that in December 2019, the bill was dropped. This is where Lord Mendelsohn has stepped in, introducing his own bill; the new bill will incorporate the following measures:
- Halve the statutory 60-day limit for payment of all invoices to 30 days, backed up by giving the Small Business Commissioner powers to impose large fines on companies that are persistent late payers, provide false payment performance data, or fail to provide requested information as part of investigations. This will give small firms in construction the ability to refer payment disputes to the Small Business Commissioner.
- Accrued interest on late payments will be automatically included in due payments, removing the need to claim it separately.
- Outlaw certain unfair practices such as sub-contractors having to pay fees to get on main contractors’ preferred lists of suppliers and prompt payment discounts.
- The bill also seeks to amend the Public Contracts Regulations, 2015, to mandate the use of project bank accounts for public sector contracts over £500,000.
Lord Mendelsohn has stated,
“Late payment is crippling small businesses while the UK economy is crying out for investment. By failing to tackle late payment we are starving our small businesses of the capacity to act. The recent huge escalation in outstanding payments shows that decades of promoting ‘culture change’ has only made things worse. This bill will tackle the issue once and for all with a package of measures that is operable, impactful and measurable.”
The bill has been widely praised with Rudi Klein, chief executive of the SEC Group, stating,
“I wish to place on record my thanks to Lord Mendelsohn and also the thanks of SMEs in the UK’s construction industry which have had to bear the impact of payment abuse and losses from major insolvencies in the industry.”
Phil Hall, AAT head of public affairs & public policy has stated,
“There is no reason why any business should be paying its suppliers in more than 30 days and the Small Business Commissioner must have powers to impose fines on persistent late payers.
AAT welcomes the measures being proposed by Lord Mendelsohn and hopes other politicians, from all parties, back this important Private Members Bill.”
This bill should help relieve some of the pressures small businesses face, something we at Daniels Silverman assist with regularly; we often partner with SMEs to provide white label credit control services to our clients, meaning we can relieve the time, energy and stress that comes with chasing companies that don’t pay on time. If you would like to find out more about how partnering with Daniels Silverman could help to support your business then please do get in touch, we’d be happy to talk to you about how our services could help.