UK Government to Enforce Prompt Payment Code

The UK government has said that it plans to enforce the country’s Prompt Payment Code (PPC) more rigidly, with companies in the public sector required to pay contractors and sub-contractors within a period of 30 days.

The move marks the latest attempt to tackle the problem of late payments, which impact particularly heavily on British small and medium-sized enterprises. A report in 2014 found that UK SMEs collectively suffer from up to £40bn in unpaid invoices, or an average of £38,186 for each firm.

The crackdown was announced by business minister Matthew Hancock in an address to the UK’s Engineering Employers Federation (EEF). He said that while 30-day payment terms will be regarded as standard, there will be a 60-day maximum limit and that businesses failing to meet these terms will be removed from the Code unless they can prove exceptional circumstances.

“Making small businesses wait an unreasonable time for payment is entirely unacceptable,” said Hancock. “I know first-hand the great burden that late payment can place on firms – and how it can strain family finances – which is why I am committed to stopping it.

“Big companies should lead by example and pay small suppliers within 30 days. I have already written to the FTSE 350 urging them to sign up to the PPC. Fairer payment practices will help small businesses grow and create jobs. This is a key part of our long-term economic plan to build a better Britain.”

The PPC outlines various practices to which businesses that sign up must follow when dealing with and paying suppliers, such as limited companies and sole traders. These have been set out with the views of businesses and suppliers in mind. The recently-launched Code Compliance Board will be in charge of enforcing the payment terms.

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