Small Business Commissioner’s Powers Boosted to Tackle Late Payers

The UK Government is boosting the powers of the Small Business Commissioner with penalties to tackle late payers.

The Commissioner’s new powers include levying financial penalties against large businesses who are persistent late payers. The penalties will be a percentage of a business’s turnover which could mean fines of many millions for some of the UK’s current bad payers.

Late Payments

Other powers include settling late payment disputes out of court through a new adjudication function. This adds to the Commissioner’s existing ability to review enquiries and investigate formal complaints made by small businesses regarding late and overdue payments.

The new powers were announced as the UK Government published its response to the late payment consultation launched in autumn 2025 which received strong support from the business community for an expansion of the Commissioner’s powers.

James Talman, NFRC CEO

James Talman, NFRC CEO, commented: “This is one of the most significant moments for our industry in decades and during my time as NFRC CEO. We’ve all been fighting for the abolition of retentions for nearly a decade, and today the Government has delivered. Our members can hold their heads high, this happened because they engaged with us and Government. They shared their experiences, and they refused to let the issue drop.

“The numbers tell the story. In 2021, we estimated that £300 million of roofing contractors’ cash was sitting in retentions at any one time. In 2025, 80% of our Members were still reporting that retentions were affecting their business. That is not an abstract policy problem, that is money withheld from real businesses, real people, and real livelihoods.

“I hope this decision shows our members the power of common interest and strong representation.”

Payment Terms 60-Day Limit + Interest

Other actions the Government is announcing today to clamp down on late payments include a new 60‑day limit on payment terms to be imposed on all large firms when paying smaller suppliers. Plus, mandatory interest on late payments, with a requirement for all commercial contracts to include statutory interest set at 8% above the Bank of England base rate.

Emma Jones, Small Business Commissioner

Research from the Department of Business and Trade and the Small Business Commissioner has shown that late payments cost the UK economy almost £11 billion per year. The issue causes 38 businesses to close each day with business owners spending an average of 86 hours chasing debt.

Emma Jones, Small Business Commissioner, said: “For too many late payments and long payment times persist with little accountability. These reforms will reduce the hours spent chasing debt, allowing small businesses to focus on more productive and enjoyable growth.”

Construction Pressure Point

This crackdown on late payments was welcomed by BCIS Chief Economist, Dr David Crosthwaite, who said the new powers should support greater financial resilience across the construction sector, but the overall impact will depend on how these measures interact with wider market conditions. 

Dr David Crosthwaite, BCIS Chief Economist

Dr Crosthwaite said: “Late payment has long been a pressure point in construction supply chains, particularly for SMEs and specialist contractors, where delays can place significant strain on cashflow. The government’s proposed reforms represent a positive step towards improving payment discipline.

“Stronger enforcement powers, a 60-day cap on payment terms and mandatory interest on late payments would help improve the flow of money through supply chains and provide greater certainty for smaller firms. However, insolvency risk in construction is typically driven by a combination of factors.

“Alongside cashflow pressures, firms continue to operate with tight margins, cost volatility and exposure to project-specific risks, as well as higher employment and business costs, including recent increases in employer-related costs, which are adding to overall cost pressures. In this context, late payment can act as a trigger in an already fragile financial position.

“Proposals to address retention practices are particularly relevant, given the risk to firms when upstream contractors become insolvent. However, retentions have traditionally played a role in managing defects liability and quality assurance, so any changes will need to ensure that appropriate mechanisms remain in place to maintain delivery standards.

“The reforms come at a time when firms are still managing ongoing cost pressures and economic uncertainty. Improving payment practices should support greater financial resilience across the sector, although the overall impact will depend on how these measures interact with wider market conditions.”

>>Read more on late payments in the news