A Bill to end late payments to small businesses is due to enter Parliament.
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.
Late payments close 38 businesses every day because they are not paid on time – the equivalent of 266 a week, and more than a thousand in any given month.
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.
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.
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 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.”
