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NEWS / Infrastructure Intelligence / Crackdown on late payments announced in plan to back small businesses

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Business and trade secretary Jonathan Reynolds - UK Parliament

31 JUL 2025

CRACKDOWN ON LATE PAYMENTS ANNOUNCED IN PLAN TO BACK SMALL BUSINESSES

The government has announced new support measures for small businesses – including major reforms to ensure SMEs are paid on time.

The Department for Business and Trade is planning legislation to give stronger powers to the Small Business Commissioner to impose fines on firms who persistently pay their suppliers late.

Employing 60% of the country’s workforce and generating £28 trillion in turnover, the government today said for too long “the odds have been stacked against small businesses”.

Late payment is an issue costing the UK economy £11bn a year which leads to the closure of 38 businesses every day, said government.

The Small Business Commissioner will be given new powers to carry out spot checks and enforce a 30-day invoice verification period to speed up resolutions to disputes. The upcoming legislation will also introduce maximum payment terms of 60 days, reducing to 45 days, giving firms certainty they’ll be paid on time.

Audit committees, under the proposals, will also be legally required to scrutinise payment practices at board level, placing greater pressure on large firms to show they’re treating small suppliers fairly backed by mandatory interest charges for those who pay late.

These changes will also save small businesses time, freeing up hours currently spent chasing overdue invoices so they can focus on growing their business instead.

The government is also tackling access to finance, another major barrier for small firms. It is launching a new £4bn wave of financial support aimed at boosting growth and supporting more small businesses to start up and grow. This includes a £1bn boost for new businesses, with 69,000 Start-Up Loans and mentoring support to inspire the next generation of entrepreneurs and small business owners.

A new £3bn boost to the British Business Bank - raising the total guarantee to £5bn - will help lenders offer more small business loans through the ENABLE programme. Under the scheme, the BBB provides a government-backed guarantee to help lenders feel safer when lending to smaller or newer businesses, enabling them to offer better loan terms including with lower interest.

Government says accelerating SME growth by just 1% per year, could deliver £320bn to the UK economy by 2030.

Business and trade secretary, Jonathan Reynolds, said:  “This country is home to some of the brightest entrepreneurs and innovative businesses in the world, and we want to unleash their full potential by giving them back time and money to do what they do best - growing our local economies.

“Our Small Business Plan – the first in over a decade – is slashing unnecessary admin costs, making it easier for businesses to set up shop and giving SMEs the financial backing they need.

“This is our Plan for Change in action, putting more money in people’s pockets, boosting local communities and ensuring Britain is a great place to do business and thrive.”

Policy chair of the Federation of Small Businesses (FSB), Tina McKenzie, added: “Making sure businesses are paid on time, that our high streets thrive, and creating conditions in which everyone can start and succeed in business are crucial priorities for small businesses, communities and the economy. It’s very welcome that the prime minister has today made them his government’s priorities.

 “I’m pleased that FSB and the government have been able to work in lockstep on the bold and ambitious measures needed to tackle the scourge of late payment through legislation, and other pro-growth, pro-small business measures.

“Today’s plan is an encouraging commitment from the government to take the side of small businesses in the great growth challenge ahead.”

ACE Group, which comprises the Association for Consultancy and Engineering (ACE) and the Environmental Industries Commission (EIC), has also welcomed the news.

Director of policy at ACE Group, Marie-Claude Hemming, said: "Small businesses are the lifeblood of our economy and the engineering design and consultancy sector is no exception. It is now clear that Government has listened and acted for SMEs at the forefront of infrastructure delivery.  

"Alongside Government's commitment to £725bn for infrastructure investment and a 10-year Infrastructure Strategy, today’s announcement will create opportunities for SMEs in the small engineering design and consultancy space to grow their capability and help deliver the homes and infrastructure the UK needs.  

"To drive success, clients across both the public and private sectors must also play their part by proactively creating access for SMEs to these opportunities.  

"The scourge of late payments continues to plague our industry. It is imperative that the new proposals work for the infrastructure sector and stamp out poor behaviour once and for all. Today’s announcements will not be a panacea for all SME problems. However, we look forward to working with Government over the coming months and years to ensure the SME agenda remains at the heart of policy making."

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