Labour peer introduces 30-day limit to eliminate late payments

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Labour peer Lord Mendelsohn has introduced legislation to help tackle the issue of late payments in construction and to strengthen the powers of the small business commissioner

In an effort to combat late payments, Lord Mendelsohn is introducing a Private Members Bill to the House of Lords.

Almost a quarter of insolvencies (23%) are caused by late payment issues. Even for those companies that manage to absorb late payment, the loss of income can halt small businesses from investing and growing.

Late payments can also damage productivity and can have a negative impact on the business owner’s mental health.

Association of Accounting Technicians (AAT) has fought a campaign to tackle this problem by making three changes. These are:

  • The Prompt Payment Code should be made compulsory for companies with more than 250 staff;
  • Payment terms should be halved from a maximum of 60 days to a maximum of 30 days;
  • A clear, simple financial penalty regime for persistent late payers should be introduced and enforced by the small business commissioner.

YouGov polling published by AAT last year showed that almost three quarters (73%) of MPs backed the three AAT recommendations.

Building on the AAT proposals, today (21 January) Labour Peer Lord Mendelsohn introduces a Private Members Bill to the House of Lords. This Bill aims to introduce a statutory 30-day limit for payment of all invoices, backed up by giving the small business commissioner powers to impose large fines on the worst, persistent offenders.

Lord Mendelsohn’s Bill will also ban the most predatory payment practices like prompt payment discounts, where purchasers demand discounts for prompt payment of invoices; charges for onboarding and staying on supplier lists.

Late payments cripple small businesses

Lord Mendelsohn said: “Late payment is crippling small businesses while the UK economy is crying out for investment. By failing to tackle late payment we are starving our small businesses of the capacity to act.

“The recent huge escalation in outstanding payments shows that decades of promoting ‘culture change’ has only made things worse.

“This Bill will tackle the issue once and for all with a package of measures that is operable, impactful and measurable.”

Phil Hall, AAT head of public affairs & public policy, added: “AAT has long campaigned for meaningful action to end the scourge of late payment.

“Despite lots of noise from Government, they have only provided more bureaucracy, tinkering and an emphasis on voluntary measures.

“There is no reason why any business should be paying its suppliers in more than 30 days and the small business commissioner must have powers to impose fines on persistent late payers.

“As a result, AAT very much welcomes the measures being proposed by Lord Mendelsohn and hopes other politicians, from all parties, back this important Private Members Bill.”

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