Strengthening SME Protections

New Fair Payment Pledge from Online Marketplaces and Payment Providers.

Off the back of the UK government’s recent announcement of a consultation on reforms to the current late payments regime, the Small Business Commissioner (‘Commissioner’) has announced that leading online marketplaces and payment providers, including eBay, Stripe, PayPal, Temu, and B&Q, have signed a new pledge supporting small businesses using their platforms. 

The pledge, which contains 10 voluntary commitments, promotes the fair treatment of small businesses, intending to ensure that they are not unduly impacted by restrictions on cashflow and payments. 

These commitments include promptly informing small businesses when accounts are reserved or funds withheld with clear explanations for why action has been taken together with steps affected businesses must take for withheld funds to be released. Signatories also commit to implementing efficient checks to minimise disruption to cashflow and to provide clear terms and conditions concerning the withholding of funds and to communicate any material changes to those terms.

Further commitments include ensuring that penalties or refund demands are evidence-based, enabling appeals with the opportunity for small businesses to submit additional evidence, and conducting timely case reviews in response to complaints. Funds should be released quickly where there is no legitimate reason to withhold them, and small businesses should not be exploited by being offered working capital solutions by a business who has withheld funds. The initiative also encourages constructive engagement with the UK government and the Commissioner.

Guidance accompanying the pledge outlines the circumstances when funds may be withheld, and explains how small businesses can navigate these situations effectively and minimise the risk of funds being withheld. 

Emma Jones, the Small Business Commissioner, said:

“Online marketplaces and payment providers…are under a wide range of legal obligations which can often impact small businesses’ access to their funds.
This guidance, along with the pledge made by these companies, will help to ensure small business know their rights, have the support they need, understand what factors influence the withholding of funds and help them make the most of the opportunity going digital brings.

This is also just the start. We are working with more companies that we hope will be able to sign in due course so that we can promote this guidance and reach the widest audience of SMEs.”

This announcement signals a clear statement of intent to prioritise the needs of smaller businesses and drive meaningful improvements in how they are treated, coming amidst an increased focus by the UK government on supporting small and medium-sized enterprises. This is reflected in the Department for Business and Trade’s ‘Backing Your Business’ plan which was unveiled in July, containing a long-term strategy to improve the UK operating environment for smaller firms and make it easier to start and grow a business, and setting out a range of measures which the UK government intends to implement. It is likely that this announcement will, therefore, form part of a broader package of measures aimed at strengthening support for small and medium-sized businesses, with further regulatory changes likely to follow in the coming months and years. 

Against this backdrop, businesses operating in the UK should proactively begin to consider their operations and assess how they engage with suppliers – rather than waiting for the law to change – to ensure that they are well positioned to comply with new regulatory requirements as they are implemented.