The problem of late payment of debts has existed since the dawn of time. As intractable as badly timed roadworks, the issue has long prompted governments to introduce preventative legislation, but have failed to make serious inroads, because suppliers aim to keep relationships alive at almost any cost.
The problem of late payment is serious. The government’s Small Business Commissioner published research on late payments a year ago – in July 2025. It found, strikingly, that late payments are estimated to cost the UK around £11bn a year, that 1.5 million (28%) of businesses are affected, that they’re on average owed £17,000 (collectively £26bn) and that some 14,000 firms a year close because of debts being paid late. Worse, some 22% of firms reckoned that they spend, on average, 86 hours a year chasing what they’re owed1.
Recent legislation has had little effect in dealing with the most intransigent of late payers – not the Late Payment of Commercial Debts (Interest) Act 1998, not The Late Payment of Commercial Debts Regulations 2002, and nor The Late Payment of Commercial Debts Regulations 2013.
However, there is hope that the former Starmer government’s introduction of the Small Business Protections Bill (formerly the Commercial Payments Bill) into Parliament in May (2026) might actually make a difference.
The bill’s sponsor, Blair McDougall, Minister for Small Business and Economic Transformation, said, back in March of this year, that he understood the problems experienced by small firms: “When a business closes its doors or has to cut back, the impact isn’t abstract – it’s people struggling to pay bills, keep up with rent, and take care of their families. I know. I’ve been there.”
Apparently, before entering politics, he ran a small business and remembers reviewing his bank account every few hours, checking to see if money he was owed had finally arrived “so I could afford to buy my family Christmas presents.”
Central to the provisions of the bill are major new powers for the Small Business Commissioner that enable it to investigate businesses suspected of poor payment practices, adjudicate disputes, and issue fines – potentially amounting to millions of pounds – to the worst offenders.
The bill also proposes changing the rules on how businesses pay each other, with a strict 60-day cap on payment terms for large firms paying smaller suppliers, a new mandatory interest rate on late payments to encourage prompt payment, and deadlines for disputing invoices.
Further, boards or audit committees of persistently late-paying large companies will be required to publish explanations for poor payment performance and the actions they are taking to address it.
The bill squarely seeks to help smaller firms that lack commercial clout when dealing with recalcitrant (larger) customers.
And this is something that the Warwick Business School hopes for too. It said: “Small businesses across the UK are set to benefit from the strongest commercial payment regulations of any major economy”, adding, “the UK’s proposed combination of mandatory interest, accessible adjudication, proactive Serious Breach of Contract (SBC) investigation, and financial penalties is the most structurally coherent attempt globally to close this gap2.”
Similarly, Sam Cooper, counsel at Crowell & Moring LLP, thinks that “the era of contractual freedom in relation to payment terms, interest rates and dispute procedures in commercial contracts is drawing to a close.” He continues: “If enacted, the bill will fundamentally alter the balance of power in commercial payment relationships, replacing negotiated terms with mandatory statutory requirements backed by regulatory enforcement 3.”
In other words, there’s light at the end of the tunnel.
- www.smallbusinesscommissioner.gov.uk/late-payments-research-2
- www.wbs.ac.uk/news/uk-sets-global-standard-for-small-business-payment-rights
- www.crowell.com/a/web/2bcBNM9WDCdQjWeCkBp3bd/uk-bill-would-transform-commercial-payments-terms.pdf