The problem of late payment has existed for as long as businesses have traded. Like badly timed roadworks, it remains a persistent problem.
Governments have introduced legislation to tackle late payments. However, these measures have had limited success. Many suppliers tolerate late payment because they want to protect important customer relationships.
The problem is serious. Research published by the government’s Small Business Commissioner in July 2025 found that late payments cost the UK around £11 billion each year.
The research also found that 1.5 million businesses (28%) are affected. On average, each affected business is owed £17,000, with total outstanding debts reaching around £26 billion.
An estimated 14,000 businesses close each year because customers pay their debts late. Around 22% of businesses also reported spending an average of 86 hours a year chasing overdue payments.¹
Previous legislation has done little to tackle the worst late payers. This includes the Late Payment of Commercial Debts (Interest) Act 1998, the Late Payment of Commercial Debts Regulations 2002, and the Late Payment of Commercial Debts Regulations 2013.
There is now hope that the Small Business Protections Bill, formerly known as the Commercial Payments Bill, could make a real difference. The government introduced the bill to Parliament in May 2026.
The bill’s sponsor, Blair McDougall, Minister for Small Business and Economic Transformation, said in March 2026 that he understands the problems faced by small businesses.
He said:
“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.”
Before entering politics, McDougall reportedly ran a small business himself. He recalled checking his bank account every few hours to see whether money owed to him had arrived. He said he needed the money to afford Christmas presents for his family.
Stronger Powers for the Small Business Commissioner
A key part of the bill would give the Small Business Commissioner much stronger powers.
The Commissioner would be able to investigate businesses suspected of poor payment practices. It could also adjudicate disputes and issue fines. These penalties could potentially reach millions of pounds for the worst offenders.
The bill would also introduce new rules governing business-to-business payments.
Large companies would face a 60-day maximum payment period when paying smaller suppliers. The proposals also include mandatory interest on late payments and deadlines for disputing invoices.
Large companies with a persistent record of late payment would face further scrutiny. Their boards or audit committees would need to explain their poor payment performance and outline the steps they are taking to improve it.
The bill aims to help smaller businesses that often lack the commercial power to challenge larger customers over late payment.
Support from Business Experts
The proposals have also received support from Warwick Business School.
It said:
“Small businesses across the UK are set to benefit from the strongest commercial payment regulations of any major economy.”
It added that the UK’s proposed combination of mandatory interest, accessible adjudication, proactive Serious Breach of Contract (SBC) investigations and financial penalties represents the most structurally coherent attempt globally to address the problem.²
Sam Cooper, counsel at Crowell & Moring LLP, also believes the changes could significantly alter commercial payment practices.
He said:
“The era of contractual freedom in relation to payment terms, interest rates and dispute procedures in commercial contracts is drawing to a close.”
He added:
“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
For small businesses dealing with persistent late payers, the message is clear.
There may finally be light at the end of the tunnel.
Sources
- Small Business Commissioner – Late Payments Research, July 2025
- Warwick Business School – UK Sets Global Standard for Small Business Payment Rights
- Crowell & Moring LLP – UK Bill Would Transform Commercial Payments Terms
