60-Day Late Payment Laws to be Introduced

NEW MAXIMUM PAYMENT terms of 60 days are being planned to tackle late payments to small businesses, to be introduced in a new law.

Late payments to small businesses cost the UK economy £11bn a year and shuts down 38 businesses every day.

60-Day Late Payment Laws

The new laws are set to give stronger powers to the Small Business Commissioner to impose fines against the biggest firms who persistently pay their suppliers late.

The Small Business Commissioner will also gain powers to carry out spot checks and enforce a 30-day invoice verification period to speed up resolutions to disputes.

Audit committees, under the proposals, will also be legally required to scrutinise payment practices at board level.

Late payments are one of the biggest barriers to small business growth —causing cashflow problems that stop firms from scaling up and investing. Small and medium sized firms employ 60% of the country’s workforce and generate £2.8 trillion in turnover.

Holding Britain Back

Prime Minister Keir Starmer said: “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.

“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.”

Access to Finance

As part of the plan, the government is also tackling access to finance for small businesses. The Government is launching £4 billion aimed at boosting growth and supporting more small businesses to start. It includes £1bn for new businesses, creating 69,000 Start-Up Loans and mentoring support.

The British Business Bank will receive £3 billion – raising the total guarantee to £5 billion – to help lenders offer more small business loans through the ‘ENABLE programme’. Under the scheme, the BBB provides a government-backed guarantee to lenders when lending to smaller or newer businesses, enabling them to offer better loan terms with lower interest.

Government says accelerating SME growth by just 1% a year, could deliver £320bn to the UK economy by 2030.

INDUSTRY COMMENT

Brian Berry, FMB CEO

Brian Berry, Chief Executive of the FMB commented: “Late payments remain one of the biggest challenges for SME builders, disrupting cashflow, delaying projects and putting many firms at risk. Unlike larger volume builders, small firms work job to job and are far less able to absorb additional costs compared with the larger volume builders. The Government’s commitment to tackle late payment in the Small Business Plan will be welcomed across the sector, as prompt and fair payment is vital to the sustainability of small builders and the wider economy.

“Small builders are also facing a perfect storm of rising costs, skills shortages and planning delays alongside these cashflow pressures. It is positive to see the Plan include action to tackle tool theft with the recruitment of 13,000 more police officers, as well as measures to improve access to finance for small businesses. The emphasis on future-proofing skills is welcome as investing in training and attracting the next generation is essential to keep the small building sector strong and sustainable. We need to see the Government build on this plan and prioritise delivery of the promised streamlined planning reforms for small builders, particularly the fast‑track approvals for sites of up to nine houses, which will help small firms deliver the homes Britain needs.”

James Talman, NFRC CEO

James Talman, NFRC Group CEO, said: “This is a critical opportunity to end the unfair practice of retention once and for all.

“Our members consistently report this as one of their greatest business challenges, and it’s encouraging to see the Government finally taking action.”

Read the NFRC’s full response here.

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