Late payments cost small companies £22,000 a year on average, and they also cause almost 50,000 business closures yearly. In response, the government is thinking of enacting stricter new legislation to guarantee prompt payments and hold larger organizations responsible in order to support the expansion of small businesses.

As part of this plan, legislation will be introduced to force major corporations to report on their payment processes on the official government website, GOV.UK, twice a year. This will increase accountability and transparency. major reports, which offer a clear picture of how major companies interact with smaller organizations, will also be required to be included in yearly reports. Directors of businesses that disregard the law may be charged with crimes and subject to hefty penalties.

In order to address the negative payment habits that afflict small businesses, a consultation is scheduled to begin in the coming months. The Federation of Small Businesses reports that over 2.6 million small businesses in the UK are impacted by 52% of small businesses experiencing late payments on a quarterly basis.

"We're determined to back small businesses by unlocking their barriers to growth, and stamping out late payments is at the heart of this," said Prime Minister Keir Starmer, emphasizing the government's commitment to eradicating these obstacles.

"Late payments are simply unacceptable and this government is determined to level the playing field for small business," said Jonathan Reynolds, the business secretary. Small businesses fail when their financial flow runs out, therefore we must hold larger companies accountable for their payment policies and create an atmosphere that encourages development and employment.

In addition, the outmoded Prompt Payment Code will be replaced by the new Fair Payment Code. Companies who regularly treat their suppliers fairly will be highlighted with official code status, which ranges from gold to bronze. To get this status, businesses will need to prove that they follow excellent payment procedures.

The implementation of this policy is a component of a larger plan to support the growth of SMEs, which also includes lowering trade obstacles and changing business rates. The government is also trying to create a climate that is more favorable for small firms with its new industrial strategy and enhanced assistance for SME exports.