The government has announced a fresh “crackdown” on late payment, with measures including broader reporting rules, a Fair Payment Code and consultation on “tough new laws”.
While large companies are already obliged to report on their pay performance, the government has said new legislation “introduced in the comings weeks” will force companies to detail their payment practices in annual reports.
Construction News understands that the government will amend the Reporting on Payment Practices and Performances Regulations to make contractors report on policies and key metrics relating to retentions – and will also consider further action on retentions.
This revives plans announced by the previous government in November last year.
It said the measure would “put the onus on [companies] to provide clarity […] about how they treat small firms”, adding that “company boards and international investors will be able to see how firms are operating”.
The government also vowed to use existing laws to “step up” enforcement of large companies not complying with their pay performance obligations – threatening them with “potentially unlimited fines and criminal records”.
And it has unveiled a new Fair Payment Code – to replace the Prompt Payment Code – which will be launched in the autumn and overseen by small business commissioner Liz Barclay. The voluntary code will rank signatories gold, silver or bronze based on their performance.
“The new code will reward businesses that treat their suppliers fairly and pay them quickly,” Barclay said. “It will also include an ambitious new gold award which aims to make 30-day payments the new standard for which businesses can aim.”
Finally, the government said it will launch a new consultation “in coming months” considering “tough new laws which will hold larger firms to account”. The government said a “range of further policy measures” will be considered but has not said what they will be.
The proposals follow on from a consultation published by the previous government in January last year that highlighted an “ongoing need to ensure greater compliance in terms of prompt payment”.
It is unclear whether the consultation will consider whether to outlaw retentions in construction – a policy called for by Mace chief executive Mark Reynolds, who is co-chair of the government-sponsored Construction Leadership Council.
Compelling contractors to report their retentions payment practices is a measure announced by the former Conservative government and detailed in a subsequent impact assessment, but not implemented before the general election in July.
Prime minister Keir Starmer said: “We’re determined to back small businesses by unlocking their barriers to growth, and stamping out late payments is at the heart of this.
“We know how important it is for business owners to have the peace of mind and certainty around their cashflow to keep their businesses alive. Late payments cost businesses tens of thousands of pounds and is one of the biggest reasons businesses collapse.
“After years of delay, we’re bringing forward measures that small businesses have long been calling for to tackle late payments once and for all.”
Marie-Claude Hemming, director of operations at the Civil Engineering Contractors Association, said on LinkedIn: “This looks like it will keep the reforms that were going through the legislative process when the election was called, and then go further to tackle late payments once and for all.”
