The government’s commitment to new legislation tackling late payments has been described as a historic moment for small businesses.
The Federation of Small Businesses (FSB) says the reforms could mark a turning point after years of smaller firms struggling with poor payment practices from larger customers.
Confirmed in the King’s Speech, the government’s plans will introduce tougher rules around prompt payment during this parliament. These include maximum payment terms of 60 days and mandatory interest on late payments, set at 8% above the Bank of England base rate.
For many small businesses, late payment is more than an administrative frustration. It can create serious cash flow problems, making it harder to pay wages, settle bills, meet tax deadlines and plan for growth.
The FSB argues that too many large businesses have effectively used smaller suppliers as a source of free credit, delaying payments while passing financial pressure down the supply chain.
Tina McKenzie, Policy Chair of the FSB, said late payment destroys thousands of viable small firms each year, damages confidence and leaves business owners under significant stress.
Alongside the payment reforms, the FSB also welcomed proposals to regulate third-party intermediaries such as energy brokers and consultants. It says stronger oversight could help end hidden commissions, poor sales practices and unclear pricing—giving small firms greater confidence when managing energy costs.
However, the FSB raised concerns about proposals to increase visitor levies in England, warning that tourism and hospitality businesses are already under significant pressure. It said any legislation must be carefully designed to avoid discouraging visitors or placing additional strain on small firms.
The announcement signals a broader attempt to strengthen protections for smaller businesses. If delivered effectively, the late payment reforms could help improve cash flow, restore confidence and give small firms a fairer footing when dealing with larger customers.
