New rules for late payments in the UK
The government has announced plans to tackle late payments with the most significant legislative reforms in 25 years.
Late payments are one of the biggest barriers to small business growth – causing cashflow problems that stop firms from scaling up and investing in their future. Small and medium-sized firms employ 60% of the country’s workforce and generate £2.8 trillion in turnover.
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 upcoming legislation will also introduce maximum payment terms of 60 days, reduced to 45 days, giving firms certainty that they’ll be paid on time.
Audit committees, under the proposals, will also be legally required to scrutinise payment practices at board level, placing greater pressure on large firms to show they’re treating small suppliers fairly, backed by mandatory interest charges for those who pay late.
These changes will also save small businesses valuable time, freeing up hours currently spent chasing overdue invoices so they can focus on growing their business instead. Taken together, this will help ensure businesses are paid on time and end the scourge of late payments, which costs the UK economy £11 billion per year and closes down 38 UK businesses every day.
“From builders and electricians to freelance designers and manufacturers – too many hardworking people are being forced to spend precious hours chasing payments instead of doing what they do best – growing their businesses,” said Prime Minister Keir Starmer.
“It’s unfair, it’s exhausting, and it’s holding Britain back. So, our message is clear: it’s time to pay up. 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.”
