New bill marks largest crackdown on late payments in over 25 years

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 eight per cent 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.

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, 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.”