The country’s largest construction firms will have to publish details this year about how quickly they pay suppliers, under measures to be revealed today.
Small business minister Margot James is to announce an initiative today to force firms to make public their payment performance twice a year or risk criminal prosecution.
Companies with two out of the following three characteristics – a turnover of £36m, a balance sheet of £18m and a staff headcount of more than 250 – will be forced to abide by the legislation.
According to latest government figures, more than £26bn is owed to SMEs in overdue payments.
The government has said that it hopes the new legislation will shine a light on late payment by large firms and help ensure smaller companies are paid on time.
Under the new law, firms will have to report on their performance twice: once at the half-way point of the financial year; and again at the year-end.
The reports will break down payment performance on the percentage of invoices paid between one and 30 days, the proportion between 31 and 60 days; and the remainder.
Firms will also have to calculate and publish the average time it takes for it to pay suppliers over the six-month period.
The implementation of the law was first mooted in 2014 by then business minister Matthew Hancock and was part of the Small Business Act passed in March 2015.
The new policy was first expected to be implemented last April but required secondary legislation, which was delayed due to changes to the government that have occurred since then.
The new law will come into effect on the 6 April, with firms whose financial years begin on 6 April required to publish payment details within 30 days of 5 October.
Ms James said: “The UK is home to a record 5.5m small businesses and the industrial strategy will help address many of the challenges they face getting finance and scaling up.
“It’s completely unacceptable that SMEs are owed £26.3bn in late payments, which hampers their ability to grow and has no place in an economy that works for all.
“Large businesses have an important role to play and the guidance published today will help them fulfil their responsibilities and improve payment practices across the board.”