Large companies will have to report on their payment practices every year in the first step of a crackdown to end small businesses being paid late, the Chancellor has announced.
Philip Hammond said the Government will require companies to review their payment practices through their audit committees, with a non-executive director responsible for the supply chain, and report back on them in annual accounts.
He said it was a “first step” in efforts to end the “the scourge of late payments for our small businesses”.
Business Secretary Greg Clark will unveil more details in due course, while the Government will also publish its full response to last year’s call for evidence on the issue shortly.
The Federation of Small Businesses (FSB) cheered the move to start bringing the “rife and pernicious” practice of late payments to an end.
It said late payments leads to the closure of 50,000 small firms a year, with four out of five firms having paid late.
Mike Cherry, national chairman of the FSB, said: “Poor payment practices by big businesses towards their smaller suppliers are rife and pernicious, leading to the closure of 50,000 small firms a year.”
He added: “The end of late payments could finally be in sight.
“It can’t come soon enough, to bolster small businesses at a time when they are in great need of support and a lift in confidence.”
The FSB stepped up its campaign to make larger companies pay their bills on time earlier this year, calling for reforms to tackle poor payment practices.
Most small firms are paid late, including those in the public sector, research suggests.
Mr Clark said at the time it was reviewing more than 300 responses to the Government’s consultation on late payments launched a year ago.
MPs on the Business Select Committee said recently there should be a statutory requirement for companies to pay within 30 days.
They found several companies took on average more than 60 days to pay an invoice.