The Government has introduced a landmark new Bill aimed at tackling the growing problem of late payments to small businesses, with ministers describing the measures as the biggest crackdown in more than 25 years.
Late payment remains one of the most significant pressures facing smaller firms, particularly at a time when many businesses are already coping with rising wage costs, inflation and tighter cash flow. Government figures suggest that late payments contribute to the closure of dozens of businesses every day across the UK.
Under the proposed Small Business Protections Bill, large businesses would face a legal requirement to pay smaller suppliers within 60 days. The legislation would also introduce mandatory interest charges on overdue payments, currently proposed at 8% above the Bank of England base rate.
The Small Business Commissioner would receive stronger powers to investigate poor payment practices, resolve disputes and issue financial penalties against persistent late payers. The Bill also proposes restrictions on the use of retention payments within the construction sector, an area where delayed payments have long been a concern.
For many smaller businesses, the proposals could provide welcome support for working capital and cash flow management, particularly where larger customers have historically imposed lengthy payment terms.
Business owners may still wish to review:
- credit control procedures,
- debtor monitoring systems,
- invoice collection processes,
- and cash flow forecasting arrangements.
Improving internal systems alongside any future legal protection may help reduce financial pressure and strengthen business resilience.
