Closed consultation

Statutory Review of the Small Business Commissioner

Published 15 February 2023

Part of the Payment and Cash Flow Review

Introduction

This statutory review invites views and evidence from stakeholders on the performance of the Small Business Commissioner. As required by legislation, this statutory review will particularly examine the Commissioner’s effectiveness in carrying out the functions of the office. Specific questions are set out at the end of this document.

This statutory review forms a part of the wider payment and cash flow review, examining business payment performance, payment culture and behaviour, and Government’s role in promoting prompt payment by businesses.

This is a challenging time for small businesses. As part of our support, Government has been proactive in attempting to stamp out the worst kind of poor payment practices to support small businesses who are least able to cover financial shortfalls and find temporary finance more difficult and more expensive to obtain. However, late payment remains a significant problem for small businesses across the UK.

Evidence from a previous call for evidence suggested existing SBC powers were seen by many as being insufficiently strong. We know that the Commissioner is investigating a smaller number of complaints than expected, and the Commissioner has been prevented from acting on evidence of poor payment practices because some small businesses have wanted to avoid conflict with significant and influential customers. That said, we know the Commissioner handles numerous enquiries, and every complaint the Commissioner deals with represents support given to a business in a challenging situation – potentially enabling their long-term survival and growth.

In reviewing performance, we will consider the SBC’s effectiveness in carrying out the Commissioner’s functions, looking particularly at the impact of their work on improving payment practices in commercial transactions, and awareness and use of alternative dispute resolution procedures among small businesses. As part of this review, we will also consider the governance relationship between the Department and the SBC and whether there is scope for a more efficient, effective arrangement. As such, we are also seeking stakeholder’s views and evidence on where the balance should lie between maintaining the Commissioner’s independence and ensuring a proportionate, flexible, and effective governance relationship between the SBC and the Department. We are also interested in feedback on whether the SBCs function is sufficiently clear.

Thank you for taking the time to respond to this invitation to give evidence and views.

General information

Why we are consulting

Under section 10 of the Enterprise Act 2016, we are required to conduct a statutory review on the Small Business Commissioner’s performance, particularly their effectiveness in carrying out their functions.

In line with the legislation, we are also looking at the impact of the Commissioner’s work on:

• improving commercial payment practices and
• small business’ awareness/use of alternative dispute resolution.

Due to the COVID-19 pandemic delaying the originally planned statutory review, we are seeking input from stakeholders in relation to the whole period of time since the SBC’s establishment, that is, including the original statutory review period (ending 31st March 2020) and to date.

Consultation details

Issued: 15 February 2023

Respond by: 28 April 2023

Enquiries to: responsiblepaymentculture@beis.gov.uk

Consultation reference: Statutory Review of the Small Business Commissioner

Audiences:

We are seeking views from all those with an interest in the Small Business Commissioner’s work and its effectiveness. This includes, but is not restricted to, large, medium, small and micro businesses and business representative groups.

Territorial extent:

The Office of the Small Business Commissioner covers England and Wales, Scotland and Northern Ireland

How to respond

Please respond via this online form

When responding, please state whether you are responding as an individual or representing the views of an organisation.

Your response will be most useful if it is framed in direct response to the questions posed, though further comments and evidence are also welcome.

Confidentiality and data protection

Information you provide in response to this consultation, including personal information, may be disclosed in accordance with UK legislation (the Freedom of Information Act 2000, the Data Protection Act 2018 and the Environmental Information Regulations 2004).

If you want the information that you provide to be treated as confidential please tell us, but be aware that we cannot guarantee confidentiality in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not be regarded by us as a confidentiality request.

We will process your personal data in accordance with all applicable data protection laws. See our privacy policy.

We will summarise all responses and publish this summary on GOV.UK. The summary will include a list of names or organisations that responded, but not people’s personal names, addresses or other contact details.

Quality assurance

This consultation has been carried out in accordance with the government’s consultation principles.

If you have any complaints about the way this consultation has been conducted, please email: beis.bru@beis.gov.uk.

Background

The Small Business Commissioner (SBC) is an arm’s length body of the Department for Business and Trade established under Part 1 of the Enterprise Act 2016.

Launched in December 2017, the Commissioner leads an operationally independent office, providing support to small businesses especially in relation to the issue of payment disputes with their larger business customers, including what action to take if a payment is overdue. This can include general advice and information to small businesses in connection with their supply relationships with larger businesses, including signposting small businesses to existing support and dispute resolution services. Information and advice are primarily delivered through the Commissioner’s website, which any business can access.

The Commissioner also considers and investigates complaints from small businesses (those with fewer than 50 employees) relating to payment matters in connection with the supply of goods and services to larger businesses (those with 50 employees or more). Following investigation and consideration of the complaint, the Commissioner can make non-binding recommendations as to how the parties could resolve their disputes. Under existing legislation, the Commissioner can only investigate poor payment practice when a small business complains directly and when such a complaint conforms to the requirements of the Small Business Commissioner (Scope and Scheme) Regulations 2017.

The Commissioner also has the power to publish a report of the inquiry into, and consideration and determination of, a complaint. Upon consideration of the relevant factors, that report may name the larger respondent business. The report may highlight poor payment practices of the larger business and equally may praise good payment practices.

A key focus of the work of the Commissioner is to empower small businesses to resolve payment disputes with larger businesses and avoid future issues by encouraging a culture change in payment practices and how businesses deal with each other. The Commissioner does not have the power to proactively investigate poor payment practice, even when there is evidence or intelligence to suggest this is occurring.

We would be grateful for views of any stakeholders who have engaged with the Small Business Commissioner, or who have an interest in its operations. We are also seeking the views of the Small Business Commissioner.

Evidence and views received in response to this invitation will inform the findings and any recommendations arising from the statutory review. We therefore encourage stakeholders to provide supporting qualitative and quantitative evidence where possible. Responding to specific questions at the end of this document as much as possible enables us to gather and compare information from a range of respondents.

We will publish a report of the review’s findings as part of the wider payment and cash flow review.

Potential outcomes

We will objectively conduct the review to gather evidence to inform the best way forward, without pre-judging the outcome. Possible outcomes may include:

• The SBC is judged to be broadly effective.  A decision would then be required on whether to proceed to strengthen the powers of the SBC, in order to enhance effectiveness further.
• The review finds that the current functions delivered by the SBC could be made more efficient and effective, perhaps by being joined-up with other similar functions.  For example, strengthening the delivery of functions may be achieved through a different organisational approach.
• The review finds that the SBC is not judged to be sufficiently effective in carrying out the functions of the office, and Secretary of State concludes that the organisation should be wound up (with no action taken to replace the SBC’s function and responsibilities).

The role of the SBC will also be explored as part of the wider review and will also influence future policy interventions.

Wider policy landscape

The establishment of the Small Business Commissioner and the complaints scheme operated by the Commissioner are part of several Government interventions to tackle late payments in business-to-business relationships.

This includes:

• Late Payment of Commercial Debts (Interest) Act 1998
• Prompt Payment Code (also administered by the SBC): signatories commit to paying 95% of their invoices from smaller businesses within 30 days
• The Reporting on Payment Practices and Performance Regulations 2017 ^{[footnote 1]}

In addition, the government has made a commitment to pay 90% of SME invoices within 5 days and 100% within 30 days. A Procurement Bill, currently making its way through Parliament, will ensure 30-day payment terms in contracts throughout the public sector supply chain (subject to Royal Assent).

Independence and organisational status

The SBC has separate legal personality as a corporation sole and was set up as a Non-Departmental Public Body because this was felt to be necessary to ensure the SBC’s independence.

We would be grateful for stakeholder views on the status of the SBC. Particularly, we would like views on whether other models of delivery (for example, more closely integrated to central government, or a different organisational form such as a government office) should be explored.

Questions to business and stakeholders

Respond using the Word form provided. When responding, please state whether you are responding as an individual or representing the views of an organisation.

1. How aware do you think businesses are of the role of the Small Business Commissioner? How aware would you say you are of the SBCs role as set out in this statutory review document?

2. Have you had any interactions with the SBC

a. yes
b. no

3. If yes,

(i) how often?

a. regularly (more than twice a year)
b. occasionally (more than once a year)
c. rarely (one or more times since SBC formed)

(ii) Has your interaction with the Small Business Commissioner mainly been as a

a. trading business
b. stakeholder with an interest in SBC’s activities

(iii) How satisfied are you with your dealings with the SBC?

a. Very satisfied
b. Satisfied
c. Neutral
d. Unsatisfied
e. Very unsatisfied

4. In your view, what impact, if any, has the SBC had on your business relationships (for example, with business suppliers or business customers), and/or business relationships between business suppliers and business customers in general.

5. Do you think that resolving a complaint between business suppliers and business customers has become easier or harder since the establishment of the Small Business Commissioner? Why?

6. What do you believe has been the impact of the SBC on payment issues?

7. In your view, is the role of the Small Business Commissioner sufficiently clear? How would you explain the role?

8. How effective do you consider the SBC has been in exercising the powers of the office:

a. running a complaint scheme
b. using powers to investigate a report from a small business that they are not being paid by a large business within the terms of their contract
c. general advice to small businesses on payment issues
d. drawing attention to the importance of prompt payment and taking steps to improve culture around payment practices
e. drawing attention to alternative dispute resolution options and approaches

Please give your reasons: This question will allow us to gauge the broad sense of effectiveness in wide terms. Detailed analysis of effectiveness will be judged by responses to all questions.

9. What else could the SBC do to improve payment culture?

10. The SBC receives fewer complaints than expected. What do you consider are the primary reasons why small businesses tend not to raise complaints with the SBC? Please indicate what you think is the most important reason, and also tick all other reasons that you think apply:

a. Fear of some form of penalty from business customer
b. Do not think the SBC will be able to do anything
c. Any concerns can be addressed in other ways (give examples where possible)
d. The concerns can be more effectively dealt with by a trade association
e. Concerns over confidentiality
f. The SBC’s remit and whether it can help is unclear
g. Other reason (please describe what this is)

11. Would the introduction of broader powers for the Commissioner to investigate issues on their own initiative, or as a result of anonymous information, help address the late payment issues faced by small businesses?  What else would encourage you or business in general to raise an issue with the SBC?

12. Please provide any additional feedback on the scope of the SBC’s powers, including the extent to which you consider it enables or restricts the SBC to fulfil the Commissioner’s purpose.

Next steps

We will publish a report of the review’s findings as part of the wider payment and cash flow review.

1. SI 2017/395. ↩