Draft Reporting on Payment Practices and Performance (Amendment) Regulations 2024

Rushanara Ali Excerpts

Monday 18th March 2024 General Committees

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Stringer.

Late payments are a scourge on small businesses. At any time, UK small businesses are waiting for over £20 billion worth of overdue invoices. As the Minister has pointed out, that is a huge challenge. Research by Smart Data Foundry using Sage accounting data found that in 2021 a typical small business was owed approximately £22,000 in late payments. Larger firms failing to pay on time denies businesses in their supply chains the valuable cash that they need to pay staff, buy materials and deliver on future orders. As the Minister said, 50,000 businesses go under every year in the UK because of hold-ups in their cash flow.

The eye-watering increases in rent, energy bills and suppliers’ costs make the need to take strong action on late payments more urgent than ever. Late payments are crippling businesses and therefore limiting crucial growth in our economy. They impact on businesses of all sizes, but particularly on small businesses and microbusinesses; such businesses are especially exposed to liquidity problems when they do not receive payments on time, which then limits their ability to invest in future growth. Research from Barclays shows that businesses in the UK are more concerned about the impact of late payments on their business growth than businesses in any other economy in Europe. Two in every five SME owners say that their mental wellbeing has suffered as a result of late payments, and over a third have had sleepless nights.

I welcome these amendments to the 2017 regulations, as they are a positive step in the right direction. We will not stand in the way of measures that will help businesses to grow, scale up and invest. However, it has taken a very long time for the Government to tackle this deep-seated problem, so I hope this is the beginning of the rapid action that is needed to ensure that we prevent small and medium-sized businesses from suffering from the scourge of late payment.

There are stark power imbalances between small and big businesses. These reforms and the increased transparency will go some way to tackling that gap, but as the impact assessment shows, the risk remains that power imbalances will continue to limit suppliers’ capacity to negotiate fairer terms. Transparency is only one element of the negotiation, and wider issues will remain in certain sectors. I would be grateful if the Minister clarified what steps will be taken to protect and empower small businesses in the negotiation of fairer terms with big businesses. I know that the Minister for small business is looking into those issues.

Ministers are still waiting for the outcome of the ongoing Financial Reporting Council review on non-financial reporting to see if payment performance data should be a requirement in businesses’ annual reports. I urge the Government to ensure that that requirement is included to increase transparency in the business community, to ensure that businesses prioritise prompt payments and consistently focus on good performance, and to achieve a culture change in the business community to tackle late payment. I would be grateful if the Minister clarified the timeline for that report and when we can expect an announcement on the requirement to include payment performance data in annual reports.