New powers to tackle late payments: A step forward for SMEs

Under new plans announced 24 March 2026, the Small Business Commissioner will have stronger powers to investigate poor payment practices and fine large businesses that repeatedly pay late.

Companies with revenues above £54 million will also face a maximum 60-day payment term in commercial contracts, with suppliers entitled to statutory interest on overdue invoices at 8 per cent above the Bank of England base rate. Persistent late payers may also have to explain their conduct in their annual reports.

This marks a tougher regulatory response to a problem that affects far more than cashflow. For SMEs, late payment can stall hiring, delay investment and create uncertainty across the business. The reforms may make it easier for smaller businesses to challenge poor payment behaviour, particularly where delays have become routine rather than exceptional.

For many SMEs, the impact goes beyond a single unpaid invoice, with persistent late payment often influencing how suppliers price risk, negotiate supply chain contracts and assess a customer’s longer-term commercial viability.

Head of Dispute Resolution, Ian Carson, says:

Many SME owners will be encouraged by the Commissioner's recent announcement because late payments can place a real pressure on their cashflow and make it much harder to plan, invest and grow. For smaller businesses especially, late payments leave them carrying the costs of delays they simply can’t afford.

“Giving the Small Business Commissioner stronger powers should help address some of the worst payment practices and, over time, may lead to healthier relationships across supply chains. It also sends an important message that persistent late payment is not just frustrating for smaller suppliers, it has a wider detrimental impact and is something the government is now prepared to treat more seriously.

“At the same time, businesses should be careful not to see this as a complete answer to every payment issue. It won’t prevent genuine disputes over whether goods or services have been delivered properly, whether contractual milestones have been met, or whether an invoice is valid under the contract. Just as importantly, it’s not a substitute for having clear, well-drafted payment terms, dispute provisions and invoicing clauses in the first place. Those details will still make all the difference should problems arise.

“For SMEs, this is a positive step that should make it easier to push back on poor payment terms. For larger businesses, it is a clear warning to get their payment processes in order, not just to manage legal risk, but to avoid damaging valuable supplier relationships.

Following the announcement, SMEs should use this moment to tighten the basics. It may also be worth considering whether frameworks such as the Fair Payment Code offer a useful benchmark when reviewing prospective customers or payment practices.

Review payment terms, make sure invoicing provisions are clear, issue invoices promptly and keep a record of any delay or challenge. Stronger enforcement may help shift behaviour, but good contracts and early action will still matter if a payment dispute develops.

If your business is dealing with a late payment, our dispute resolution solicitors can help you understand your options, protect your cash flow, and take practical steps to recover what you are owed.