THE UK Government is introducing landmark legislation designed to end the ‘scourge’ of late payments.
The Small Business Protections Bill (formally known as the Commercial Payments Bill) puts a ‘clear duty’ on large firms to pay smaller suppliers on time and give small businesses the certainty they need to keep investing, supporting jobs, and growing their communities.
It comes as the prime minister and business secretary are expected to welcome small business owners and Federation of Small Businesses (FSB) representatives to Downing Street to mark what leaders have called a ‘historic moment for small firms’.
Late payments close 38 businesses every single day – that’s the equivalent of 266 a week, and well over a thousand in any given month. For business owners, the impact is immediate and personal – forcing them to spend hours chasing invoices instead of running their businesses and putting jobs and livelihoods at risk.
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.”
Reforms include a 60-day cap on payment terms on all large firms paying smaller suppliers, mandatory interest on late payments, set at 8% above the Bank of England base rate, and a ban on the practice of withholding retention payments under construction contracts.
On top of this, the small business commissioner is getting new powers to investigate poor payment practices, adjudicate disputes, and fine the worst offenders – with potential fines that could be worth tens of millions for persistently late payers.
UK Government business secretary Peter Kyle added, “Costing the UK economy £11 billion 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.”
The bill builds upon and strengthens legislation first laid out in the 1998 Late Payment of Commercial Debt Act, over 25 years ago, to give what the UK Government said is the strongest legal framework on late payments in the G7.
