Exclusive: Epic fail on both of UK Gov's late payment regulations

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The Department for Business, Energy and Industrial Strategy (BEIS) stands accused of a cynical betrayal to businesses over its failure to implement two separate initiatives on late payments.

It has emerged that barely 200 of the businesses impacted by the Reporting on Payment Practices and Performance Regulations 2017, a law which requires larger companies and LLPs to publicise their payment terms to suppliers twice a year, have been invited to register for the online reporting system where that information should be publicly available. The online reporting system itself remains unavailable to the public five months after its intended launch.

In addition, both the identity and scope of work of the UK’s Small Business Commissioner – an ombudsman focusing on late payments to SMEs – remain unknown over two years after the position was announced with great fanfare as part of the Enterprise Act 2016.

The extraordinary revelations came in a House of Lords debate on late payments held on 11 September. Lord Prior of Brampton, the parliamentary under-secretary of state for business, energy and industrial strategy, was unaware that as of July only 208 businesses out of approximately 15,200 – roughly 1% - had been invited to create accounts on the online reporting system.

In January BEIS stated the reporting system would be available from April 2017 on gov.uk and all information about a business’s payment practices would be visible as soon as a business published it. The regulations provide for mandatory reporting from October 2017 but according to Lord Prior, “the website will contain more reporting information from mid-2018 when it is expected that the majority of businesses who meet the requirements will have begun reporting.”

Indeed, according to Lord Prior, reporting on the system will be done on an annual basis, “so we will not know until April 2018 how many companies are doing it.” Precisely what sort of system, in our data-driven times, will only permit annual reporting is a bit of a mystery.

The bigger mystery, of course, is the system itself. As of 18 September, the Payment Practices reporting system is not publicly linked to anywhere on gov.uk, listed in BEIS’ business guidance area of gov.uk, or even referred to in the existing guidance on late payments. While eligible businesses were invited to begin voluntary reporting from April, information on how many took up the offer – like the online reporting itself – remains hidden from the public.

Put simply, a business owner experiencing late payment issues from a larger company, but who did not happen to know about the regulations, would have no way of finding out that the system exists, that their late payer’s terms should be publicly available, or that they were meant, by now, to have some sort of recourse for the injustice.

 At the time of publication, the thresholds for this reporting are:

  • £36m annual turnover
  • £18m balance sheet total
  • 250 employees

Government should ‘get their act together’ on commissioner appointment

The Lords debate also held BEIS to account for the failure to appoint the Small Business Commissioner, an office which would provide dispute resolution, independent advice, and a complaints service for SMEs suffering from late payments from suppliers. That was the intention, at least, when the plans were announced in September 2015 to “support the government’s ambition to make the UK the best place to grow a business.”

Two years later, it was left to the Lords to note that “if this government think that supporting small businesses is important, surely they should get their act together in under two years. If a small business had to wait for two years to make such an appointment, it would be bankrupt.”

In response, Lord Prior assured that “interviews have taken place for the Small Business Commissioner and an appointment will be made in the near term— ‘soon’ is, I think, the right word. By the end of the year, when further secondary legislation comes through Parliament, the complaints handling system which the commissioner will operate will be in place as well.”

As with the Payment Practices Regulations, the only information available about the Small Business Commissioner’s mandate on gov.uk is all publicity and no substance. A report on the outcome of a consultation held on the process for handling complaints, published in February, is the last update of note from BEIS. As with the Payment Practices and Performance Regulations, only the most policy-conscious small businesses would know that the plans exist.

The original intention was for the Small Business Commissioner to commence work in October, and we may well see grand announcements to that effect quite soon. However, the post and its scope may be further behind than even the Lords realise. 

According to this link, a digital agency in the Midlands was conducting focus groups as recently as last week about helping to “shape the Small Business Commissioner service”, which likely means the online portal for reporting late payment disputes. It suggests that BEIS is taking a digital solutionist approach to the commissioner role: a shiny new platform as the solution in and of itself.

Any technology is only as good as the leadership behind it, be it an online dispute resolution platform or a portal for looking up supplier payment terms. With no Small Business Commissioner in post, no payment practices portal available to those who need it, no information provided on either project’s resources or management, and only the most proactive Lords holding a Brexit-obsessed government to account on both matters, the lack of progress on two initiatives designed to provide certainty to small businesses in uncertain times has only made the problem worse.

About Heather Burns

Heather Burns profile image

I focus on UK and EU policy and legislation, and the ways they impact the digital economy. Outside AccountingWeb I am a digital law specialist for the web design and development professions.

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18th Sep 2017 13:39

The real problem is that the UK does not have a central enforcer of company law. Even where we have regulators they are too close to the industry and will sell their souls to ensure that they get a good job after a stint at the regulatory body. Look at the FRC - funded by big firms and populated by their personnel. Fines levied on big firms are passed to the ICAEW rather than victims of poor practices. Without independent, robust and accountable regulators, all laws will continue to flounder.

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