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Government announces plans to deal with late payments

He is expected to announce new legislation forcing businesses to publish their payment terms in order to shame them into changing their behaviour.

The Government is also expected to work with the Institute of Credit Management to strengthen the terms of the Prompt Payment Code, a voluntary set of guidelines which more than 1,500 businesses have signed.

It will refrain, however, from taking the harsher measures which some have demanded to tackle the problem, including fines for those who pay late.

A parliamentary enquiry carried out last year found that small and medium-sized businesses were owed more than 36bn in late payments.

PCG, a group which represents contractors and freelancers, said that the move doesn’t go far enough.

Simon McVicker, director of policy and public affairs at PCG, said:In order for it to be effective, the Prompt Payment Code must be compulsory for large companies and it must include sanctions for the worst offenders.

“We also need a system for small businesses to report offenders anonymously, so they are not compelled to jeopardise important client relationships by sticking their heads above the parapet.

The reality is that the only way to ensure big companies pay up on time is to take direct legislative action.

John Allan, national chairman of the Federation of Small Businesses, said that a key test would be whether those signing up to the Prompt Payment Code actually now start to pay within 60 days.

He said: Late payment is no longer acceptable and is damaging growth and job creation. Whether these measures go far enough without calling for a statutory code will be determined by how big companies respond to todays announcement and change their culture. Small businesses can no longer be expected to lend interest free to large businesses.

Related: FPB’s seven tips for tackling late payments

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