Overview

The Small Business, Enterprise and Employment Bill aimed to improve the financial landscape for small and medium-sized enterprises (SMEs) in the UK. Key aspects included increased transparency in credit scoring, stricter rules around late payments to suppliers, and better protection of retention monies in the construction industry.

Description

Late Payment Reporting for Companies

The act mandates that specified companies must report quarterly on late payments to suppliers. This includes lists of payments made over 30 days late, confirmation of interest paid (Bank of England base rate + 8% APR) for late payments, and details of payment plans for outstanding amounts. False reporting is a punishable offence.

Credit Scoring Transparency for SMEs

The bill introduces a requirement for designated banks and credit reference agencies to provide SMEs with information about the criteria used to calculate their credit scores upon request. This aims to increase transparency and allow businesses to understand and potentially improve their scores.

Protection of Retention Monies in Construction

A significant portion of the act focuses on protecting retention monies (money held back by a client to ensure a contractor completes work). This section requires payers (clients) to hold retention monies in trust for the payee (contractor) in a separate bank account, with interest accruing to the payee. Strict rules are outlined regarding the release of these funds, including clear timelines and recourse to adjudication in case of disputes.

Government Spending

The bill does not explicitly state overall government spending figures. However, the introduction of new reporting requirements and regulatory oversight will likely involve some level of administrative and enforcement costs for government agencies. The impact assessment required before implementing regulations under Section 4 will help gauge potential costs incurred by banks, credit reference agencies, and businesses, and how that may affect borrowing costs for SMEs.

Groups Affected

• Small and Medium-Sized Enterprises (SMEs): SMEs will benefit from greater transparency in credit scoring and stronger protection against late payments from larger clients. However, they may also face new reporting requirements.
• Suppliers to Companies: Suppliers will benefit from increased protection against late payments, leading to potentially more timely payments.
• Banks and Credit Reference Agencies: These institutions will face new obligations regarding data transparency and reporting.
• Construction Companies (Payees): Contractors will have greater protection for retention monies due to them, reducing financial risks.
• Construction Clients (Payers): Clients will face new obligations regarding the handling of retention monies.
• Financial Conduct Authority (FCA): The FCA will be responsible for enforcing compliance with the new regulations.

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