In this week’s Enews, we look at the government’s crackdown on late payments to small businesses. There is also a positive response to new public procurement rules and warnings over the impact of a proposed tourist tax to update you on.

• Government unveils crackdown on late payments
• New procurement rules offer SMEs hope
• Tourist tax would hit consumers with £1.6 billion tax rise

Small businesses to be backed by new, stronger measures to tackle late payments, the government has announced.

The Small Business Commissioner will be given sweeping new powers to investigate poor payment practices, adjudicate payment disputes, and fine the worst offenders – with fines worth tens of millions for firms that persistently pay late or fail to comply with the new laws.

The government says the measures will tackle a problem costing the UK economy £11 billion every year.

The changes will include a new 60-day cap on payment terms on all large firms when paying smaller suppliers. New mandatory interest on late payments will also be introduced, with a requirement for all commercial contracts to include statutory interest set at 8% above the Bank of England base rate.

Business Secretary Peter Kyle said:

‘Far too many businesses are forced to shut down because they have not been paid – that is simply unacceptable.

‘We are unveiling the strongest, most robust changes to payment laws in over a generation – laws that will transform the fortunes of small businesses for years to come and make their day to day lives much easier.’

Internet link: GOV.UK

The government’s new procurement rules that target opportunities for smaller businesses offer hope to SMEs, according to the British Chambers of Commerce (BCC).

Government departments have, for the first time, set individual spending targets for SMEs to deliver over £7.4 billion a year to small businesses by 2028.

Departments have for the first time, individually set direct SME spending targets and will publish yearly progress updates ensuring they are held to account, those who fall behind will need to set out robust actions on how they will improve.

In 2024, the BCC and Tussell’s SME Procurement Tracker found only 20% of direct procurement spend from the wider public sector, including central government, went to SMEs.

Jonny Haseldine, Head of Business Environment policy at the BCC, said:

‘This shake up is long overdue as public procurement spend with SMEs has been stuck in a rut. Although the value of contracts with SMEs has continued to rise their slice of the pie is still far too small. For too many businesses, government contracts remain out of reach.  

‘This new scheme has the potential to be a game changer, giving smaller firms across the UK greater access to procurement opportunities and supply chains. 

‘As has been demonstrated by Chamber-led supply chains at major infrastructure projects such as Sizewell C and Hinkley Point, SMEs are a vital part of the ecosystem. They provide local skills and knowledge to projects as well as significantly boosting regional economic growth.’

Internet link: BCC website | GOV.UK

The government’s proposed tourist tax would constitute a £1.6 billion tax increase for holidaymakers, according to analysis by Oxford Economics.

The modelling, which was commissioned by UKHospitality, assumed a 5% levy is fully realised by 2030.

It showed a £2.2 billion reduction in GDP, £1.6 billion tax bill for UK holidaymakers, £688 million in reduced tax receipts for the Treasury and a loss of £101m in direct investment from hospitality and tourism businesses.

The modelling by Oxford Economics also considered a £2 levy per person per night and a £2 levy per room per night. All scenarios resulted in a reduction in GDP, tourism spending, nights spent in accommodation and total jobs.

Allen Simpson, Chief Executive of UKHospitality, said:

‘The numbers are clear. A holiday tax would hike costs for Brits, make staycations more expensive and decimate tourism.

‘There are no winners from a holiday tax. From coastal communities and city centres to local guesthouses, pubs and taxi firms, the impacts are stark and indiscriminate.

‘Taxes up, jobs lost and our high streets hit once again. Holidays are for relaxing, not taxing. The government should keep it that way and stop the holiday tax.’

Internet link: UKHospitality website