UK Government May Soften Supplier Payment Regulations Following Industry Pressure

Policy Reversal Under Consideration

The UK government is reportedly considering scaling back planned legislation that would shorten payment times for small suppliers, according to sources familiar with the matter. This potential policy shift comes after extensive lobbying from large corporations, which have warned that stricter payment terms could squeeze their cash flow and hamper economic investment.

Policy Reversal Under Consideration
Original Legislative Framework
Industry Opposition Mounts
Practical Implementation Concerns
Industry Body Perspectives
Government Response

Original Legislative Framework

In July, Prime Minister Sir Keir Starmer unveiled what was described as the “toughest late payment laws in the G7” as part of a comprehensive small business strategy. The proposed measures included empowering a commissioner to impose financial penalties for late payments and requiring large companies to disclose their payment terms in annual reports. According to government estimates, late payments cost the UK economy approximately £11 billion annually and contribute to the closure of 38 businesses every day.

Industry Opposition Mounts

A recent consultation on the impending legislation attracted significant attention from major businesses, with numerous large corporations urging the government to abandon plans to reduce maximum payment terms. The proposed legislation would have gradually decreased payment windows from the current 60-day standard under the voluntary Prompt Payment Code to 45 days over five years., according to recent innovations

Sources indicate that submissions from national retail chains, online retailers, and supermarkets have all pressed the government to focus exclusively on late payments rather than implementing stricter payment timeframes. These concerns have reportedly been discussed at senior levels within both the Business Department and Treasury., according to technology trends

Practical Implementation Concerns

Large fashion and electronics retailers have highlighted potential complications with the legislation as currently drafted. Industry representatives note that the proposed rules would include overseas suppliers, despite shipping times from countries like China typically taking around 40 days. Other businesses have argued that commercial and financing terms are typically negotiated around payment timelines, meaning widespread renegotiations would be necessary.

Nick Stowe, chief executive of fashion retailer Monsoon, stated that “despite the good intentions, the legislation doesn’t seem like it is thought through. We have commercial terms that incorporate what we negotiate on payment terms so while it might seem like a good idea to enforce shorter payment terms, it will just mean changes in other areas to offset that.”, according to technology insights

Industry Body Perspectives

Graham Wynn, assistant director of business & regulation at the British Retail Consortium, expressed concerns that the proposed legislation would “likely lead to cash flow problems and the government should reconsider these proposals.”, according to industry analysis

Meanwhile, the Federation of Small Businesses (FSB), which participated extensively in drafting the original legislation, has mobilized its 500,000 members to contribute to the consultation process. FSB Policy Chair Tina McKenzie argued that “there is no good reason why big corporates should be allowed to bankroll their businesses at the expense of their smaller suppliers by using loopholes to keep them waiting more than two months to settle an invoice.”, according to industry developments

Government Response

A government spokesperson stated: “This government refuses to stand idly by as 38 businesses are forced to go under every single day because of late payments. Our consultation aims to bring forward the strongest payment laws in the G7, but we want to make sure these measures are right for all sectors, which is why we’ll be closely reviewing all submissions over the coming weeks.”

Analysts suggest the final legislation may represent a compromise between protecting small businesses and addressing concerns from larger corporations about operational flexibility and international supply chain complexities.