Late payment crackdown launched as Government gets strict on scourge which 'closes 38 businesses a day'
New 60-day time limits will be introduced, with interest applied to payments which are not made on time
Large firms paying other businesses late will face their largest crackdown in more than 25 years, as a new business bill enters Parliament.
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The Government has announced that the Small Business Protections Bill will see Britain subject to the toughest late payment rules in the G7.
Firms that pay late will face mandatory interest on what they owe, as well as a new 60-day cap on payment terms for large firms.
The interest rate applied to late payments will be set at 8% above the Bank of England base rate under the proposed laws.
The Bill, set to be introduced to Parliament on Tuesday, will also grant the Small Business Commissioner the power to investigate and fine persistent late payers with penalties worth tens of millions of pounds.
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Late payments have been identified as a reason that many small firms go out of business, and the Government says that the new measures will give enterprises certainty needed to "keep investing, supporting jobs and growing their communities"
Announcing the bill, business secretary Peter Kyle told LBC he wants to see large fines dished out to firms that leave small businesses waiting on payments for goods and services.
Mr Kyle told LBC's political editor Natasha Clark: "This is to tackle the scourge of small businesses being paid late by larger businesses.
"It holds them to ransom and the impact it has on small businesses is really profound. It stops them doing their business. And at the moment, we've got over almost 40 businesses a day going bust.
"This is going to unlock billions of pounds into our economy. That £11 billion is going to be unlocked into the economy. Where's that money going? Straight into small businesses. Where are those businesses? Right around communities, right around the country."
According to Government statistics, late payments are responsible for closing 38 businesses every day.
Prime Minister Keir Starmer said: "Small businesses are the backbone of our economy - run by people who take risks, create jobs and keep communities going. This government is firmly on their side.
“Too many small business owners are spending hours chasing money they are owed and when payments don’t come through, the cost is personal. It’s about whether you can pay your staff, keep the lights on, or invest in your future.
“Today we’re changing that with the toughest action on late payments in a generation, so small businesses get paid on time and get the backing they need to grow, create jobs and serve their communities.”