- UK is backing small companies with the toughest legal guidelines on late payments in the G7
- Sweeping new powers for the Small Business Commissioner, together with multi-million-pound fines to maintain large companies and chronic offenders to account
- Measures will assist sort out value of residing for entrepreneurs and SME homeowners by guaranteeing they’re paid on time and stop the abuse of retention payments in building
Small companies can be paid on time – that’s the clear message from authorities as we speak [24 March] as it cracks down on late payments, with the biggest set of reforms in over a technology.
The Small Business Commissioner can be given sweeping new powers to examine poor fee practices, adjudicate fee disputes, and high quality the worst offenders – with fines price tens of tens of millions for companies that persistently pay late or fail to adjust to the brand new legal guidelines.
The measures will sort out an issue costing the UK economic system £11 billion each yr and ease the price of residing for entrepreneurs and SME homeowners who are sometimes pressured to wait months – or even years – to obtain cash they’ve already earned and having to chase endlessly to obtain it.
Some 38 companies shut their doorways each single day as a result of they aren’t paid on time – the equal of 266 per week, and effectively over a thousand in any given month.
Every small enterprise proprietor, together with tradespeople, freelancers, household companies and the self-employed, have to waste money and time chasing unpaid invoices after they might be rising their enterprise.
These measures, which would be the toughest in the G7, construct upon and strengthen laws on late payments, first laid out in the 1998 Late Payment of Commercial Debt Act, over 25 years in the past. They go additional than any earlier authorities and can increase our economic system and provides small companies higher cashflow.
The modifications will embody a new 60-day cap on fee phrases on all giant companies when paying smaller suppliers. New necessary curiosity on late payments will additionally be launched, with a requirement for all business contracts to embody statutory curiosity set at 8% above the Bank of England base price.
For instance, if a small enterprise is owed £10,000 by one in all its clients and is paid 60 days later than the agreed fee date, they are going to be owed £10,293.15 together with necessary curiosity (£10,000 plus £193.15 curiosity plus £100 compensation).
We additionally suggest to ban the withholding of retention payments underneath the phrases of building contracts, consulting on its implementation. This will stop small companies shedding retentions to insolvency or non-payment.
Business Secretary Peter Kyle mentioned:
Far too many companies are pressured to shut down as a result of they haven’t been paid – that’s merely unacceptable.
We are unveiling the strongest, most strong modifications to fee legal guidelines in over a technology – legal guidelines that may remodel the fortunes of small companies for years to come and make their day to day lives a lot simpler.
After working intently with the Federation of Small Businesses, boards or audit committees of persistently late-paying giant corporations will be required to publish explanations for poor fee efficiency and the actions they’re taking to tackle it.
FSB Policy Chair Tina McKenzie mentioned:
Late payments are a blight on our economic system, so FSB is happy to have labored in partnership with the Government to ship the toughest laws in the G7. The new legal guidelines will lastly carry a cease to large companies utilizing their small suppliers as sources of free credit score.
For the primary time, audit committees and boards will query and problem poor fee efficiency, publish it in annual studies for all to see, and put it proper. Paying in 60 days shouldn’t be immediate – however strengthening that as absolutely the most cap after years of dithering is an effective step in direction of encouraging payments in 30 days throughout all provide chains. Improving the Small Business Commissioner’s powers may also assist, mandating CEO’s of Britain’s poor payers to take the telephone name.
This is actual progress, and we’ll hold working with the Government to ensure that new legal guidelines are introduced in as quickly as doable.
Minister for Small Business and Economic Transformation, Blair McDougall mentioned:
I do know first-hand how tough late payments might be, forcing you to resolve if you happen to can afford to hold a enterprise working, pay workers and even purchase Christmas presents in your kids.
That is why I’m proud to be main the cost on tackling an issue that has been left untouched for a lot too lengthy.
These are genuinely sport altering measures that may guarantee no enterprise, no employer, no household has to endure the immense pressure of being left strapped for money they’ve already earnt.
Emma Jones CBE, Small Business Commissioner mentioned:
We are on a mission to make life simpler for small companies by getting cash shifting quicker by way of the economic system by tackling late payments.
The measures the Government has introduced as we speak will strengthen the function of my workplace in taking on the worst payers alongside guaranteeing small companies have a stronger voice on fee phrases and late fee curiosity.
These reforms will scale back the hours spent chasing debt permitting small companies to focus on extra productive and satisfying progress.
Right now, some small companies have extra cash in the financial institution as a result of the Small Business Commissioner recovered thrice extra overdue invoices in 2025 than in 2024. We will carry this profit to the entire economic system.
Today’s measures observe the launch of the Small Business Plan by the Prime Minister final yr, which in addition to laying out late payments plans, additionally launched the Business Growth Service, which is already reworking the federal government assist supply for small companies, and elevated entry to finance for SMEs and entrepreneurs with an enormous £4 billion finance increase.
This is a extra interventionist authorities, backing the British enterprise neighborhood with landmark reforms that may also assist to management inflation and make our economic system extra resilient from international shocks.
Debbie Williams, co-founder of John Williams Heating Services, mentioned:
As a family-run enterprise that has served our neighborhood for greater than 20 years, we see first-hand the pressure that late payments place on small corporations. Cashflow pressures don’t simply have an effect on the steadiness sheet — they impression our means to take on apprentices, make investments in coaching and proceed offering dependable service to native households.
We welcome the Government’s focus on tackling late payments, as well timed and truthful fee practices are important for the steadiness and progress of companies like ours.
NOTES TO EDITORS
Late payments analysis: Late payments research: impact on the UK economy – GOV.UK
This authorities is backing small companies throughout the board. We are:
- Halving childcare prices for small enterprise homeowners and workers.
- Putting extra money in clients’ pockets by taking £150 off power payments, and freezing rail fares and prescription prices.
- Offering new incentives of £2,000 for SMEs who rent basis apprentices aged 16-21, on high of a whole NICs exemption for workers underneath 21 and apprentices underneath 25.
- Raising the speed when small companies begin to pay nationwide insurance coverage.
- (*25*) electrical energy costs for hundreds of producing companies.
- Making coaching for under-25 apprenticeships free for small companies.
- Doubling eligibility for enterprise tax incentives to assist fast-growing companies appeal to funding and expertise.
- (*25*) purple tape to increase our pubs, bars and cultural venues
