The Government has unveiled plans to tackle late payments, which it describes as the most “significant legislative” reforms in 25 years.
The plan is to support small businesses as part of its Plan for Change and tackle late payments that cost the UK economy £11bn a year and shuts down 38 businesses every day.
The new laws are set to give stronger powers to the Small Business Commissioner to empower them to wield fines, worth potentially millions of pounds, against the biggest firms who persistently choose to pay their suppliers late.
The Small Business Commissioner will be given new powers to carry out spot checks and enforce a 30-day invoice verification period to speed up resolutions to disputes.
The legislation will also introduce maximum payment terms of 60 days, reducing to 45 days, giving firms certainty they will be paid on time.
Financing barrier
As part of the plan, the Government is also tackling the major barrier for small businesses to finance.
It is launching a new £4bn wave of financial support aimed at boosting growth and supporting more small businesses to start up and grow. This includes a £1bn boost for new businesses, with 69,000 start-up loans and mentoring support to inspire the next generation of entrepreneurs and small business owners.
Prime Minister Keir Starmer said: “Through our Small Business Plan, we’re not only tackling the scourge of late payments once and for all, but we’re giving small business owners the backing and stability they need for their business to thrive, driving growth across the country through our Plan for Change.”
Night Time Industries Association (NTIA) CEO Michael Kill welcomed the move calling it “long overdue” and a “critical step” for UK’s small businesses.
“For the night-time economy, home to thousands of SMEs in music, hospitality, and culture, late payments can be a matter of survival. We lose 38 businesses a day to this issue. That’s not just economic loss, it’s cultural erosion,” Kill said.
New powers welcomed
“We welcome the new powers proposed for the Small Business Commissioner, mandatory interest charges for persistent late payers, and increased board-level accountability.
“These are bold steps, but the devil will be in the detail. Strong enforcement and clear, accessible mechanisms for SMEs will be vital to success.”
However, he added that this action must be coupled with wider reforms around the regulatory framework, business rates, and broader economic policy.
George Holmes, managing director of business finance specialists Aurora Capital, added: “The Government’s promise to introduce the toughest late payment laws in the G7 is a vital step forward.
“New powers for the Small Business Commissioner, legally binding payment terms, and penalties for persistent offenders are exactly what’s needed to restore fairness to supply chains. This can’t stop at promises and must now be followed through quickly, with real enforcement.”
