Late payments have long been a quiet but serious threat to small businesses—draining cash flow, stalling growth, and in some cases forcing firms to close. Now, the government says it is stepping in with tougher action.
Under new proposals, small businesses will be backed by significantly stronger protections aimed at tackling poor payment practices across the economy. At the centre of the changes is an expanded role for the Small Business Commissioner, who will gain new powers to investigate companies, resolve disputes, and impose substantial fines on repeat offenders.
For businesses that consistently pay late or fail to comply with the rules, penalties could run into the tens of millions—marking a clear shift towards enforcement rather than encouragement.
The scale of the problem is significant. The government estimates that late payments cost the UK economy around £11 billion every year, with smaller suppliers often bearing the brunt.
The reforms aim to address this imbalance directly. A new 60-day cap on payment terms will apply to large firms paying smaller suppliers, limiting how long businesses can be made to wait. In addition, late payments will automatically incur interest, with all commercial contracts required to include statutory interest set at 8% above the Bank of England base rate.
Taken together, the measures are designed to improve cash flow, reduce uncertainty, and give smaller businesses greater confidence when working with larger organisations.
Business Secretary Peter Kyle described the changes as a long-overdue intervention, pointing to the number of firms that struggle—or fail—simply because they are not paid on time. He said the reforms represent the most significant overhaul of payment laws in a generation.
For many small businesses, the impact could be immediate. Faster, more reliable payments can mean the difference between stability and financial strain—particularly in an environment where costs remain high and margins tight.
The challenge now will be ensuring the rules are enforced consistently. But if delivered as intended, the crackdown could mark a turning point in addressing one of the most persistent pressures facing the UK’s small business community.
