By Jonathan Davies

Despite not being announced in the Chancellor's Budget, the government has revealed plans to extend the Prompt Payment Code which tackles late payments.

The code will be extended to include the use of supplier lists and the government will create greater transparency of its own payment practices.

John Allan, National Chair of the Federation of Small Businesses (FSB) said: “The further action to address poor payment practices announces... sends a clear message that poor practices... will no longer be tolerated."

“The increased reporting measures for government departments is also welcome [but] to work, it needs to be rigorously monitored and enforced. It is an idea that should be extended to signatories of the prompt payment code,” he added.

The move comes after a number of high-profile firms have been accused of poor payment practices, including extending payments terms and implementing 'pay to stay' policies, where suppliers are required to make large payments to continue their contracts.

In February, Business Minister Matthew Hancock announced plans to make 30-day payment terms the standard, with 60 days the maximum.

It is part of plans to get more businesses to join the 1,700 already signed up to the Prompt Payment Code.

As part of extending the Prompt Payment Code, the government will also increase transparency of its own practices after a National Audit Office report found that a third of small businesses were not receiving payments from government on time.

Phil Orford, chief executive of the Forum of Private Business, said: “Recent revelations on ‘pay to stay‘ and dubious supply chain finance schemes have attracted significant media interest, but came as little surprise to the Forum of Private Business, which has continued to highlight the issues surrounding the abuse of supply chain relationships.”

“Late payment is just one of the practices that have put increasing pressure on small businesses, as many large firms have looked for ways to maximise their own cash flow at the expense of their supply chain. While government has led in introducing better payment practices, large firms have been slow to follow. As a result we welcome moves to tighten the Prompt Payment Code in light of recent unethical practices that the Forum has played a key role in exposing.

“We would, however, like to see a shorter timeframe for implementing such measures be made a major priority for any incoming government. Small businesses are the backbone of the British economy; and as such their interests must be represented and articulated. With the election on the horizon, it is now time to put even greater pressure on future policy makers to scrutinise the unscrupulous practices of big business. Business ethics must now be placed at the top of the political agenda."