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Enterprise Act will 'tackle the scandal of late payment'

This long awaited step could be a bonus to small businesses

A small-business commissioner is to be appointed to tackle the scourge of late payments as part of the new Enterprise Act.

Originally announced in 2015, the act finally received Royal Assent this week.

The Enterprise Act stipulates that when businesses fail to honour contractual obligations regarding payments to smaller firms, voluntary mediation services will be offered to the two parties. While some small-business owners might dismiss such a ‘voluntary’ measure as toothless, law firm Eversheds has suggested in a press release that the 'commissioner can investigate and provide conclusions to referred complaints, his or her findings potentially providing a strong platform for any subsequent litigation or referral to an external ombudsman.'

Small businesses are owed £255 billion in late payments, according to Debtguard.co.uk. Though bureaucratic payment processes are often blamed, many of the firms owed money in late payments – more than half of all small firms, according to a study by insurer Zurich – suspect that better resourced large organisations simply delay payment for interest-generating purposes.

'Big PLCs continue to use small businesses as an alternative to banks and they should be named and shamed,' Arnab Dutt, managing director of Market Harborough-based manufacturer Texane, told the Guardian in 2013.

Chris Bryce, CEO of IPSE (the Association of Independent Professionals and the Self-Employed), has welcomed the act. 'It’s great to see the government has acted on IPSE’s call for a small-business commissioner,' he said. 'The commissioner has been given the power to ‘name and shame’ companies which persistently pay late.' 

The new commissioner will also be tasked with addressing that perennial Tory bugbear: red tape. The government has set an ambitious goal of cutting the cost of bureaucracy by £10bn within five years.
The Primary Authority scheme, which gives small businesses access to tailored advice from local authorities, has also been extended.

Some 5.4 million UK small businesses will benefit from the Enterprise Act, according to business secretary Sajid Javid. 'The Enterprise Act will help deliver the growth and security that benefits every single person in the country,' he said. 'It is proof that this government is delivering on its commitment to back the business owners who are the real heroes of our economic recovery.'

The act contains benefits for workers too, specifically improved rights around declining to work on Sundays. While this might seem a red herring in any ‘enterprise’ bill, the new rights were originally part of government proposals to lift restrictions on Sunday trading. However, these measures were recently rejected by the House of Commons.

But just as the extended trading hours would only have affected larger businesses, the shortening to one month of the notice period retail staff are obliged to give their employer to opt-out from Sunday working does not apply to small businesses either; the notice period for businesses with fewer than 50 employees will remain at three months.

The government is also creating an Institute for Apprenticeships and has set an objective of creating three million new apprenticeships by 2020. Introducing a statutory definition of ‘apprenticeship’ the act will make it an offence to label training as an apprenticeship if it fails to meet statutory requirements or form part of an individual’s employment.

Reflecting the influence of devolution many of the act’s provisions will apply to England, but not in Scotland, Wales and Northern Ireland.

The regulations are expected to come into force in October 2016.

Click here for a list of measures introduced by the Enterprise Act here.



Jo Thornley

About the author

Jo joined Dynamis in 2005 to co-ordinate PR and communications and produce editorial across all business brands. She earned her spurs managing the communications strategy and now creates and develops partnerships between BusinessesForSale.com, FranchiseSales.com and PropertySales.com and likeminded companies.

@BusinessMaiden

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