Bookshops swerve ‘catastrophe’ with ‘booksellers’ exemption’ in new late payments reform
The Booksellers Association (BA) has welcomed the government’s late payments reform, announced on 24th March, thanks to the inclusion of a “booksellers’ exemption”, lobbied for by the trade body.
Meryl Halls, managing director at the Booksellers Association (BA), said the BA “welcomes the government’s proposed adjustments to its late payment proposals, which represent a pragmatic and positive response to concerns raised by the Booksellers Association, our members and the wider book trade”.
“The changes strike the right balance by protecting smaller businesses where it matters most, while recognising how our sector operates in practice,” she said.
“We have worked closely with the Department for Business and Trade and the Office of the Small Business Commissioner, alongside partners across the wider book trade, to highlight the potential unintended consequences of the original proposals, and we are grateful to the many booksellers who made their voices heard through the consultation.”
In a newsletter to members following the news, Halls outlined that “the late payment regulation changes [put forward by the government at consultation stage] threatened, by dint of unforeseen consequences, to undermine the long-established commercial relationships in the book industry, particularly in relation to small booksellers purchasing from large publishers”.
This would have “meant that [booksellers’ established terms] to pay publishers at month end (typically 30, 60 or occasionally more days from the end of the month when the invoice was raised – depending on circumstance and what was mutually agreed) would have become unlawful”.
“Instead, all of [booksellers’ invoices] would have had to be paid within 60 days at the latest (reducing to 45 days in five years) from the exact date of invoice. The impact of this on [booksellers’] cashflow and [their] terms management with suppliers could have been catastrophic,” Halls said, adding that the ability of batch payments to help booksellers manage their payments was “going to be put at risk, and the commercial relationships between booksellers and all their suppliers would have suffered a major system shock”.
However, “we were able to engage directly with the policy team on the project, who talked to us at length and who took on board our feedback about the bookselling industry. They then adjusted the legislation in two hugely significant ways that will help our members, both small and large”, Halls added.
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The first adjustment, what Halls referred to as the “booksellers’ exemption”, is the exemption from a mandatory 60-day limit on payments where the contractual agreement is between small purchaser (in this case, bookseller) and large supplier (publisher or distributor). The second adjustment is an exemption for those agreements between large and large entities.
On this, the BA said it understands this will apply to big retailers like Waterstones, with a spokesperson explaining that “there should be an exemption where Waterstones as a large supplier is buying from a large publisher (eg, Penguin Random House)”, however “we’re still waiting for exact definitions of ’large’ in the legislation, but that is our understanding at the moment”.
“These adjustments mean that the commercial payment relationships between booksellers and publishers can continue unchanged – though there will be requirements in the legislation for agreements to be contractually signed and binding – and that the threat of upending decades of established practice between booksellers and publishers has been avoided,” Halls said.
The newly announced changes – described by the government as its “toughest crackdown on late payments in over 25 years” – will include a new 60-day cap on payment terms on all large firms when paying smaller suppliers. New mandatory interest on late payments will also be introduced, with a requirement for all commercial contracts to include statutory interest set at 8% above the Bank of England base rate.
Secretary of State for Business and Trade Peter Kyle said: “Far too many businesses are forced to shut down because they have not been paid – that is simply unacceptable. We are unveiling the strongest, most robust changes to payment laws in over a generation – laws that will transform the fortunes of small businesses for years to come and make their day to day lives much easier.”
