Largest crackdown on late payments in over 25 years as landmark Bill enters Parliament
Ministers announce the introduction of legislation to tackle late payments and protect small businesses.
- Small Business Protections Bill introduced to Parliament to back small businesses with the toughest late payment regime in the G7
- Stronger new powers for the Small Business Commissioner to investigate, adjudicate disputes and fine persistent late payers with potential penalties worth tens of millions
- New 60-day cap on payment terms for large firms, mandatory interest on late payments, and action to ban the practice of retentions in construction
Small businesses will no longer be left chasing money they are already owed, as ministers today [Tuesday 19 May] introduce landmark legislation to end the scourge of late payments and back millions of sole traders, freelancers, and family firms across the country.
The Small Business Protections Bill (formally known as the Commercial Payments Bill) delivers the toughest crackdown on late payments in a generation – putting a clear duty on large firms to pay smaller suppliers on time and giving 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 because they are not paid on time. 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.
The Bill fundamentally changes how businesses pay each other, putting an end to excessive delays and unfair practices that hit small firms hardest, through sweeping new reforms.
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 clear 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 major 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.
The Office of the Small Business Commissioner has already recovered more money for small firms in the last year than in the previous four years combined.
By improving cashflow through supply chains, the Bill supports productivity, growth and keeps our small businesses afloat, by giving them the certainty they need to invest and grow.
Business Secretary Peter Kyle said:
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.
Minister for Small Business and Economic Transformation, Blair McDougall said:
I’ve spoken to too many business owners who do everything right and are still left lying awake at night wondering how they’ll pay their staff or cover their bills because they haven’t been paid what they’re owed.
Introducing this Bill is about standing up for those people, to restore fairness, dignity and security for small business owners and the self-employed, so they can focus on doing what they do best: growing their businesses and the economy.
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 us the strongest legal framework on late payments in the G7.
After working closely with the Federation of Small Businesses, these Bill powers will also ensure boards or audit committees of persistently late‑paying large companies publish clear explanations of poor payment performance and the steps they are taking to improve it.
FSB Policy Chair Tina McKenzie said:
Tackling late payment is one of the biggest things the government can do to help small businesses grow.
FSB is proud to have worked with ministers on these reforms and it’s encouraging to see the voice of small firms reflected in legislation. Giving audit committees a clear role in payment practices is a vital step in changing late payment culture.
The legislation forms part of a broader plan to back small businesses and turn the page on years of underinvestment by tackling the pressures they have faced from high inflation, borrowing costs and unnecessary bureaucracy. This includes small business rates relief of up to 100% for the smallest premises, shielding firms from costs,
Alongside this, the government is cutting costs for working families by halving childcare, introducing £2,000 incentives for SMEs hiring apprentices, boosting access to finance, and cutting red tape for hospitality, high street and cultural venues.
It also follows the Prime Minister’s Small Business Plan, launched last year to make the UK the best place to start and grow a business. Developed in partnership with small firms, the plan will boost access to finance with £4 billion of additional support, make it easier to win government contracts, and brings together advice and funding through a new Business Growth Service so firms can access the help they need in one place.
NOTES TO EDITORS
The Bill is due to be introduced in the House of Lords on Tuesday 19 May.
Late payments research: Late payments research: impact on the UK economy - GOV.UK
This government is backing small businesses across the board. We are:
- Halving childcare costs for small business owners and employees.
- Putting more money in customers’ pockets by taking £150 off energy bills, and freezing rail fares and prescription charges.
- Offering new incentives of £2,000 for SMEs who hire foundation apprentices aged 16-21, on top of a complete NICs exemption for employees under 21 and apprentices under 25.
- Raising the rate when small businesses start to pay national insurance.
- Slashing electricity prices for thousands of manufacturing businesses.
- Making training for under-25 apprenticeships free for small businesses.
- Doubling eligibility for enterprise tax incentives to help fast-growing firms attract investment and talent.
- Slashing red tape to boost our pubs, bars, and cultural venues