A new attempt to tackle late payments includes hefty fines and reporting requirements on large companies that cause cashflow problems for their smaller suppliers.

The government is planning maximum payment terms and a legal obligation on audit committees to account for their payment practices.

Previous measures, including the creation of a small business commissioner to mediate on payment disputes, have failed to make a significant impact on the problem whih costs the economy £11 billion a year by placing cashflow strains on suppliers.

Tackling late payments is part of the government’s Small Business Plan which is designed to “give small businesses the tools to thrive and drive economic growth”.

The Government is launching a one-stop-shop service for SMEs to access support, advice, and funding. This is streamlining all of the Government’s advice into one website: business.gov.uk. 

Labour has promised its plans will represent the “toughest laws on late payments” in the G7 group of nations and the proposals have won support from business groups, particularly the SME community which has felt overlooked by the government’s actions over the past year.

Tina McKenzie, policy chairwoman of the Federation of Small Businesses, said the proposals are an “encouraging commitment from the government to take the side of small businesses”.

The plan includes mandatory interest on unpaid invoices and a maximum payment term of 60 days, eventually reducing to 45 days. Currently, there is no legally-required maximum payment terms.

The commissioner will be given an beefed-up powers, including the ability to impose fines of “potentially millions of pounds” for persistent late payers.

Sir Keir Starmer said late payment was “unfair, it’s exhausting and it’s holding Britain back. So, our message is clear: it’s time to pay up.”

He added:“We’re not only tackling the scourge of late payments once and for all, but we’re giving small business owners the backing and stability they need for their business to thrive.”