The UK Government announces new set of measures to tackle late payments

The UK Government has announced an overhaul of late payment laws. The new legislation is designed to end the persistent issue of late payments, which costs the economy £11 billion a year and leads to the closure of 38 small businesses every day.

The proposed legislation introduces tighter deadlines for large companies, requiring invoices to be settled within a maximum of 60 days, reducing to 45 days over time, with substantial fines for repeated late payments. For the first time, audit committees within large firms will be legally required to oversee payment practices, increasing accountability at board level. The Small Business Commissioner will receive expanded enforcement powers, including the authority to conduct spot checks and enforce a 30-day invoice verification period to help resolve disputes more quickly.

Alongside the reforms, the government has also announced a £4 billion finance package for SMEs, which includes 69,000 start up loans and expanded mentoring support. The British Business Bank’s ENABLE programme will be boosted by £3 billion to increase the availability and affordability of lending for smaller and newer businesses.

The overall aim of the package is to improve payment practices, increase access to finance, and create a more supportive environment for small business growth.

What do the changes mean for small business owners?

For business owners, the changes could mean faster, more reliable payments from customers, freeing up cashflow and reducing the time wasted chasing overdue invoices. With stricter rules and tougher enforcement, business owners should have greater confidence that they will be paid on time, making it easier to manage their finances and invest in the business’s growth.

Ian Carson, Head of Dispute Resolution at Harper James commented:

The government’s commitment to tackling late payments will no doubt be welcomed by the millions of SMEs around the UK struggling with unpaid invoices. Only time will tell whether the plans will make a material difference and have the desired effect of improving cash flow and facilitating expansion. Much will depend on the willingness of those large businesses affected by the changes to comply with them, the effectiveness of any enforcement regime and the commercial realities of the supplier or customer relationship.