Business Groups Given Powers To Challenge Payment Practices
Photo Credit: Sebastiaan ter Burg via Compfight cc

The notion that ‘together we are stronger’ underpins many of the organisations and groups to which the UK’s smallest businesses and sole traders belong.

It’s even in the name of many of them – the Federation of Small Businesses is one example of this – and soon that sense of togetherness could be translated into genuine strength by law.

That is because the government is planning to bring in new legislation that will allow business groups and representative bodies like the FSB to challenge big brands on their poor payment practices.

Where payment terms are considered “grossly unfair” – for example, a big brand demanding a small firm supply them on 180-day terms – they will be able to be challenged by these larger representative bodies.

The government is also pledging to “lead by example” with fair payment practices in public procurement, as well as saying yet again that the Prompt Payment Code will be toughened up.

Business secretary Vince Cable said: “Large companies using their economic might to impose unreasonable terms on their suppliers causes real problems for small businesses.

“It is a significant issue and there is agreement that we need to keep the pressure up to bring about real change. This is about making the UK a fairer and more trusted place to do business.”

For its part, business minister Matthew Hancock outlined ambitious commitments from the government to settle all public sector contracts within 30 days, and pay out on 80% of these within five days.

A discussion paper has been launched, welcoming opinions from interested parties on whether the suggestions go far enough, and how they should be implemented.

It covers several key issues:

• Who might be covered by a claim? • Who can bring a claim? • What are the dispute resolution options? • What resources are available in each case? • Should the definition of ‘grossly unfair payment practices’ be refined?

Like any other legislation on this kind of matter, it is likely that claims will be entirely voluntary – and in the past, concerns about reputation with clients may have dissuaded some small businesses from taking action on late payment and unfair payment terms.

However, if this enables aggregate claims to be lodged by representative bodies on behalf of groups, rather than individual businesses or traders, it could be the catalyst to allow more claims without the worry of individual firms being ‘blacklisted’ by big customers.

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