David Cameron’s plans to launch a consultation into late payments to small businesses have been welcomed as “long overdue”, according to the Forum of Private Business.
The consultation, which will open later this year, will ask for views on the prompt payment code and how it can be strengthened and better enforced.
It will also ask respondents to consider whether further legislation is needed to ensure timely payments are made to small suppliers and what more the Government can do to support SMEs.
Alexander Jackman, head of policy at the Forum of Private Business, told Drapers the prompt payment code, which currently has 1,486 signatories, was a “perfectly reasonable system” but that it required further support from the Government.
He said: “With a bit more resource – even just one member of staff – the code could be enforced, as someone would be monitoring those who were and weren’t abiding by it.”
Jackman advocated the naming and shaming of businesses failing to comply as a strong incentive, suggesting late payment should be grounds for removal from the list of signatories for a year, with a press release sent out when offenders are caught.
FPB would also support the introduction of further legislation that would require all limited companies to state their payment dates when filing their accounts.
“At the moment, it’s just a race to the bottom,” he said.
“As a recent example, Marks & Spencer extended their settlement period [from 60 days to 75] to bring it in line with industry standards. This isn’t helping anyone - it needs to be a race to the top. Businesses should be proud to have 40 day settlement periods.
“We need to support a climate where prompt payment is considered normal and late payment is not tolerated.”