Large UK companies <a href="https://jordangazette.com/faraday-future-announces-that-the-sec-has-ended-its-years-long-investigation-with-no-enforcement-or-other-action-against-the-company-or-related-persons/”>that repeatedly delay paying suppliers will face multimillion-pound fines under sweeping new legislation aimed at tackling late payment practices and protecting small businesses.
The reforms, announced by the Department for Business and Trade, will grant enhanced enforcement powers to the Small Business Commissioner, enabling it to investigate poor payment behaviour and penalise persistent offenders.
At the centre of the new rules is a mandatory 60-day payment window for all commercial contracts involving companies with annual revenues above £54 million.
Suppliers will also gain the right to charge statutory interest on overdue invoices at a rate of 8 percentage points above the Bank of England base rate, significantly increasing the cost of late payments for larger firms.
Companies found to be consistently breaching payment standards will be required to publicly disclose their practices in annual reports, including explanations and steps taken to improve.
Business Secretary Peter Kyle said the measures represent the most significant overhaul of payment laws in a generation.
“It is simply unacceptable that so many businesses are forced to shut due to late payments,” he said. “These are the strongest, most robust changes to payment laws in over a generation.”
The government also confirmed it will consult on reforms to retention payments in the construction sector, a long-standing issue where funds are withheld and sometimes lost if a contractor becomes insolvent.
Industry bodies have broadly welcomed the reforms, describing them as a long-overdue intervention in a problem that has plagued SMEs for decades.
Federation of Small Businesses policy chair Tina McKenzie said the measures would help prevent large companies from using smaller suppliers as a source of “free credit”.
However, she cautioned that a 60-day payment window still falls short of best practice, arguing that a 30-day standard should remain the long-term goal.
Late payments are widely seen as one of the biggest barriers to SME growth, affecting cash flow, investment and hiring decisions. Government research suggests that dozens of businesses close each year as a direct result of delayed payments.
Emma Jones, the Small Business Commissioner, said the new powers would help reduce the administrative burden on smaller firms.
“Less time chasing debt means more time focused on growth,” she said, adding that stronger enforcement will help shift behaviour across the market.
The legislation is expected to be introduced when parliamentary time allows, with ministers indicating they will assess the readiness of businesses before mandating contractual changes.
The reforms mark a clear shift towards a more interventionist approach to payment practices, as policymakers seek to rebalance relationships between large corporations and their smaller suppliers.
For big businesses, the message is increasingly clear: late payment is no longer just a commercial issue, it is becoming a regulatory and reputational risk.
