Javid to legislate to help small businesses over late payment

Business secretary Sajid Javid has announced proposals to give trade associations power to intervene on behalf of their members to challenge unfair payment terms.

As well as “widening the powers for representative bodies”, Javid said in his first speech as business secretary that he would legislate to set up a Small Business Conciliation Service designed to settle payment disputes.

The service’s purpose will be to enable the firms to avoid expensive legal costs and maintain business relationships, while settling payment disputes with large corporations.

According to the Department for Business, Innovation and Skills, small firms are owed over £32bn in late payments, but many of them are not aware of their rights or are reluctant to launch legal challenges.

Creating the new service will form part of the Enterprise Bill, which will be included in the Queen’s speech this month.

Brian Berry, chief executive of the Federation of Master Builders, welcomed the moves, saying the organisation “eagerly” awaited further details of new powers for trade associations.

He added: “It is often difficult for small firms to highlight poor payment terms directly without biting off the hand that feeds. This is partly why the problem has raged on for so many years.” 

Rudi Klein, chief executive of the Specialist Engineering Contractors Group, commented that this was “another measure in the right direction”, but added that its success will depend on small businesses being willing to take it up.

He added that since 2008 there have been about 20 measures from governments to tackle unfair payment terms, and yet inroads had not been made. He said: “We have to be mindful of the fact that we need to do a lot more to get rid of this embedded attitude and bad practice on payments.”