The government is looking at ways to ensure that large businesses pay their suppliers on time.

The Prompt Payment Code (PPC) was set up in 2008 to encourage companies to pay invoices within the agreed timescale.

However, the PPC has been widely criticised for being ineffective. Recent research by YouGov revealed that 85% of small businesses were still experiencing late payment. The Federation of Small Businesses (FSB) say that many larger firms are still taking double the agreed amount of time despite having signed up to the PPC.

The National Policy Chairman at the Federation of Small Businesses, Mike Cherry, said: “It makes you question whether the Code has any teeth, with no comment made when companies extend their terms beyond 60 days.”

The government is carrying out a public consultation seeking views on how the problem can be tackled.

Prime Minister David Cameron said: “It’s not right that suppliers are not getting paid on time for the work they do and the services they provide and I know that late payment can have devastating effects on our small and medium-sized businesses.”

The consultation will highlight the issue and stress the importance of larger firms paying their bills in a reasonable time period. The government will be seeking industry views on issues such as: how to strengthen the PPC, could it do more to enforce legislation, and is there a case for issuing penalties to late payers.

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