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Late Payments regulations

Late Payment Regulations Could Make Things Worse

June 02 2017

Two recent surveys highlight the challenges that the government faces in tackling late payment culture in the UK. With small and medium sized enterprises (SMEs) reportedly owed 26bn in overdue payments, government is pinning its hopes on the creation of a Small Business Commissioner based on a successful Australian model (blog here), and new regulations to force larger businesses to report on their payment performance.

Coming into force in April 2017, the new regulations require larger businesses to report the average time they take to pay suppliers and the proportion of late invoices paid. Government hopes that the shame of having to admit the way they treat smaller suppliers may encourage larger businesses into improving their terms.

However, a survey by YouGOV found that 78% of SMEs were unaware of the new regulations and another recently published survey of small and medium sized firms found that 74% believe that the new laws will have absolutely no effect on the issue.

Tony Duggan, chief executive of Crossflow, the company behind the survey warned that the new rules may, in fact, make matters worse for SMEs:

"the new rules could make a bad situation worse. An unintended consequence is that large corporations are likely to respond by negotiating longer payment terms with suppliers to shift the goalposts and create the illusion that they are paying on time."

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