Late and unfair payment terms are undermining small and medium sized enterprises, the Small Business Minister Margot James has warned.

The UK's small-and-medium sized firms are currently owed £26 billion in overdue payments.

The Minister said: "The UK is already one of the best places in the world to start and grow a business. It is home to a record 5.5 million businesses - that's 1 million more than in 2010.

"Through our Industrial Strategy we are committed to fostering an environment in which small firms can thrive, and that means tackling barriers to growth.

"Late and unfair payment terms are a significant threat to small business survival, tightening cash flow and impairing their ability to self-invest and grow. Our industrial strategy aims to get every part of the UK firing on all cylinders and create an economy that really works for everyone.

"The common practice of late payment does not fit this vision and it is vital that we recognise that large businesses have a crucial role to play in tackling this issue."

From today large companies and Limited Liability Partnerships will be required to start reporting on their payment practices and performance for their next financial year.

This means twice per year, large businesses will publish information such as the average time taken to pay their supplier invoices. The requirement will apply to businesses that exceeded two of the following criteria in the previous 2 years:

• £36 million turnover

• £18 million balance sheet total

• 250 employees

The reports will then be available online for suppliers to look at, ultimately helping firms make informed decisions about who they do business with.

The Minister said: "This is an important step to take because the problem of late payments is not one that only impacts small businesses.

"For one thing, we all rely on smaller businesses for goods and services - from local high-street butchers we use at the weekends, to innovative technology suppliers we depend on at work. And of course, the economic contribution of these firms impacts us all.

"Small and medium sized enterprises (SMEs) make up 99.9 per cent of all UK businesses. It is unsurprising then that 60 per cent of all private sector employment is created by SMEs, who contribute 47 per cent of all UK private sector turnover.

"This is why when the UK's small businesses thrive, the whole country benefits.

"Never has this been more important than as we consult on our plans for a modern Industrial Strategy and prepare to seize the opportunities presented by the UK's departure from the EU. It is in all our interests to ensure our small businesses have the confidence to make new hires, export abroad and borrow to invest and grow.

"We want to build a strong economy where everyone plays by the same rules. By creating the conditions in which business owners know exactly when they will be paid, we can help provide greater certainty, encouraging small businesses to invest in growth and make their vital contribution to employment and economic prosperity in all corners of the UK."