For the first time, large businesses could be fined for failing to pay smaller suppliers on time as part of “a robust package of measures” unveiled by Small Business Minister Kelly Tolhurst.

As a result, company boards will now be held accountable for their payment practices, and audit committees will be forced to report these practices in company annual reports.

The Government will consult on strengthening the powers of the Small Business Commissioner to hold to account ‘the minority’ of larger businesses that fail to make payments on time.

New powers could include: compelling the disclosure of payment terms and practices; and imposing financial penalties or binding payment plans on large businesses found to have unfair payment practices.

Ms Tolhurst said: “The vast majority of businesses pay their bills on time, with the amount owed in late payments halved over the last five years.

“However, as a former small-business owner, I know the huge impact a late payment can have on the ability of a small business to plan, invest and grow.

“Small businesses are the backbone of our economy, and we want to ensure that the UK is the best place to start and grow a business.

“These measures will ensure that small businesses are given the support they need and ensure that they get paid quickly — ending the unacceptable culture of late payment.”

Mike Cherry, national chairman of the Federation of Small Businesses, said: “Small businesses will be delighted with this announcement. FSB has worked very hard with the Government to create a whole-board approach to late payment within the UK’s large companies and empower audit committees to look after the supply chain.

“Together with measures to strengthen the Small Business Commissioner’s powers and reform the Prompt Payment Code, these measures could finally see an end to poor payment practice.”