Trade bodies will be able to challenge unfair main contractor payment practices in court under new proposals put forward by the Department of Business, Innovation and Skills (BIS).
A recently launched consultation revealed plans to provide business representative bodies with additional powers to challenge “grossly unfair” contractual terms and practices on behalf of their members.
The Government believes giving these organisations further powers could give small businesses more confidence to speak out against the poor practices of their larger customers.
Business secretary Vince Cable said: “Large companies using their economic might to impose unreasonable terms on their suppliers causes real problems for small businesses. It is a significant issue and there is agreement that we need to keep the pressure up to bring about real change.
“This is about making the UK a fairer and more trusted place to do business.”
BIS also set out plans to increase transparency on the payment practices of large and listed companies and help change corporate payment culture, as well strengthening the Prompt Payment Code.
Matthew Hancock, minister of state at BIS, said: “Small businesses are the economic backbone of the UK, but some large companies are squeezing the life out of them by imposing unreasonable payment terms. This behaviour must stop, once and for all.”
BIS is seeking views on how its proposals could be implemented, and how to appropriately define “grossly unfair” as a term relating to payment practices. It is proposing this be applied if payment terms were extended to more than 60 days.
Trade bodies representing subcontractors could decide which firms to take action against, but would have to fund it from their own reserves. The organisation would be entitled to costs if they won the case, while courts would also be able to award damages to the injured party to compensate for any loss suffered.
The Government consultation states “issuing an injunction against the business with grossly unfair terms, ordering them to end the practice, would send a message to others that such terms or practices will not be tolerated.”