Late payments crackdown as Bill enters Parliament
A new Bill aimed at tackling overdue invoices and improving cash flow for small businesses has been introduced in Parliament, marking the most significant intervention on late payments in more than two decades.
Shutterstock
Department for Business & Trade
Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur United Kingdom, an international franchise of Entrepreneur Media.
Ministers have introduced landmark legislation aimed at tackling late payments, in what the government is calling the toughest regime for small business protections in the G7. The Small Business Protections Bill – formally the Commercial Payments Bill – was presented to Parliament on Tuesday and is intended to end what ministers describe as the “scourge of late payments” affecting millions of sole traders, freelancers and small firms.
The legislation would give the Small Business Commissioner stronger powers to investigate poor payment practices, adjudicate disputes and impose fines on persistent late payers. In serious cases, penalties could reach tens of millions of pounds. Under the plans, large firms would face a new 60-day cap on payment terms when dealing with smaller suppliers, alongside mandatory interest on overdue invoices set at 8% above the Bank of England base rate. The Bill also proposes to ban the practice of withholding retention payments in construction contracts.
Ministers say the reforms are designed to prevent small businesses being left to “chase money they are already owed”, arguing that late payments force firms to divert time and resources away from growth and day-to-day operations. Official figures cited by the government suggest late payments close 38 businesses a day – equivalent to 266 a week and more than 1,000 a month. The Bill will also expand the enforcement role of the Small Business Commissioner, whose office has already recovered more money for small firms in the past year than in the previous four years combined.
The move comes as the prime minister and business secretary are expected to meet small business owners and representatives from the Federation of Small Businesses at Downing Street, in what officials have described as a “historic moment for small firms”. The government says the reforms will improve cashflow across supply chains and boost productivity, giving small businesses greater certainty to invest, hire and grow.
Business Secretary Peter Kyle said: “Costing the UK economy £11bn every single year, late payments choke growth, cost jobs, and force too many good businesses to close. That ends today. Through this landmark bill we are delivering the toughest payment reforms in over a generation, to give the UK the strongest legal framework in the G7, and back small businesses with the certainty they need to grow and thrive.”
Prime Minister Keir Starmer said: “Small businesses are the backbone of our economy – run by people who take risks, create jobs and keep communities going. This government is firmly on their side. Too many small business owners are spending hours chasing money they are owed and when payments don’t come through, the cost is personal. It’s about whether you can pay your staff, keep the lights on, or invest in your future. Today we’re changing that with the toughest action on late payments in a generation, so small businesses get paid on time and get the backing they need to grow, create jobs and serve their communities.”
Ministers have introduced landmark legislation aimed at tackling late payments, in what the government is calling the toughest regime for small business protections in the G7. The Small Business Protections Bill – formally the Commercial Payments Bill – was presented to Parliament on Tuesday and is intended to end what ministers describe as the “scourge of late payments” affecting millions of sole traders, freelancers and small firms.
The legislation would give the Small Business Commissioner stronger powers to investigate poor payment practices, adjudicate disputes and impose fines on persistent late payers. In serious cases, penalties could reach tens of millions of pounds. Under the plans, large firms would face a new 60-day cap on payment terms when dealing with smaller suppliers, alongside mandatory interest on overdue invoices set at 8% above the Bank of England base rate. The Bill also proposes to ban the practice of withholding retention payments in construction contracts.
Ministers say the reforms are designed to prevent small businesses being left to “chase money they are already owed”, arguing that late payments force firms to divert time and resources away from growth and day-to-day operations. Official figures cited by the government suggest late payments close 38 businesses a day – equivalent to 266 a week and more than 1,000 a month. The Bill will also expand the enforcement role of the Small Business Commissioner, whose office has already recovered more money for small firms in the past year than in the previous four years combined.
