Labour Peer introduces legislation to deal with late payments

Lord Mendelsohn
Lord Mendelsohn

Lobbying lord is launching a private members bill today in the House of Lords in a bid to toughen-up late-paying businesses.

Today (Tuesday 21 January 2020) Labour peer Lord Mendelsohn is introducing a Private Members Bill to the House of Lords, in an effort to tackle late payments and to strengthen the powers of the Small Business Commissioner.

Almost a quarter of insolvencies (23%) are caused by late payment issues. Even for those companies that manage to absorb late payment, the loss of income can stop small businesses from investing and growing, it can also damage productivity and generally has a very negative impact – including on many business owner’s mental health.

Association of Accounting Technicians (AAT) has fought a long campaign to tackle this problem by making three major changes. These are:

  • that the Prompt Payment Code should be made compulsory for companies with more than 250 staff
  • that payment terms should be halved from a maximum of 60 days to a maximum of 30 days
  • that a clear, simple financial penalty regime for persistent late payers should be introduced and enforced by the Small Business Commissioner

YouGov polling published by AAT last year showed that almost three quarters (73%) of MPs backed the three AAT recommendations.

Building on the AAT proposals, today Labour Peer Lord Mendelsohn introduces a Private Members Bill to the House of Lords. This Bill promises to introduce a statutory 30-day limit for payment of all invoices, backed up by giving the Small Business Commissioner powers to impose large fines on the worst, persistent offenders.

Lord Mendelsohn’s Bill will also ban the most predatory payment practices like prompt payment discounts, where purchasers demand discounts for prompt payment of invoices; charges for onboarding and staying on supplier lists.

Lord Mendelsohn said: “Late payment is crippling small businesses while the UK economy is crying out for investment. By failing to tackle late payment we are starving our small businesses of the capacity to act. The recent huge escalation in outstanding payments shows that decades of promoting ‘culture change’ has only made things worse. This Bill will tackle the issue once and for all with a package of measures that is operable, impactful and measurable.”