Legislative action needed to tackle late payment, association says

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Government measures to help smaller firms get paid on time “do not go far enough”, and should introduce legislation to make the Prompt Payment Code compulsory, according to the freelancers’ organisation, PCG.

Last week business secretary Vince Cable said it will become compulsory for larger firms to publish information about their payment practices, and the government will remove legal barriers preventing firms from accessing invoice finance. The Prompt Payment Code will be strengthened, by increasing the accountability of its signatories.

This came in response to the consultation, Building a responsible payment culture, in which the majority of businesses called for more disclosure to tackle late payment.

“For too long too many large companies have been getting away with not paying their suppliers on time to maximise their profits,” Cable said. “It is small business that is suffering as a result and it needs to stop.”

But Simon McVicker, director of policy and public affairs at PCG, said that changing the ‘culture of payment’ among larger firms will only go so far in addressing the problem. 

“In order for it to be effective, the Prompt Payment Code must be compulsory for large companies and it must include sanctions for the worst offenders,” he added. “We also need a system for small businesses to report offenders anonymously, so they are not compelled to jeopardise important client relationships by sticking their heads above the parapet.