The halving of the current 60-day period comes after a string of firms – including big name contractors – were suspended from the scheme for failing to pay suppliers on time.

Despite almost 3,000 companies signing the Code, poor payment practices are still rife, with many payments delayed well beyond the current 60-day target required for 95% of invoices.

Small Business Minister Paul Scully said: “Today, we are relieving some of the pressure on small business owners by introducing significant reforms to the UK payments regime – pushing big businesses to pay their suppliers on time.

“By signing up to the Prompt Payment Code and sticking to its rules, large firms can help Britain to build back better, protecting the jobs, innovation and growth which small businesses drive right across the UK.”

The changes coming into effect immediately are:

• requiring a company’s CEO or Finance Director, or the business owner where it is a small business, to personally sign the Code to ensure responsibility for payment practices is taken at the highest level of an organisation
• introducing a new logo for signatories to use in external communications to show their commitment to the Code, making it more damaging to a company’s reputation to breach it
• acknowledgement as a condition of signing the Code that suppliers can charge interest on late invoices
• enabling administrators of the Code to investigate breaches based on third-party information

The new requirement for signatories to pay 95% of invoices from small businesses (those with less than 50 employees) within 30 days will be effective from 1 July 2021.

Federation of Small Businesses (FSB) National Chairman, Mike Cherry, said: “A late payment crisis was massively stifling the UK economy before Covid hit. The pandemic has deepened it.

“FSB has campaigned for good payment practice to become the norm across the UK economy, not least through a toughening of the Prompt Payment Code and the adoption of 30 days as the new maximum payment period.

“It’s now time for swift delivery, and for all existing and future PPC signatories to implement 30 days as the new maximum. Ending our pernicious poor payment culture for good over the coming months will be fundamental to turning our hopes of economic recovery into reality.”