UK Government Announces Major Crackdown On Late Payments
Introduction
There have been major developments today (24 March 2026) in the UK Government’s crackdown on late payments.
They have announced that small businesses are to be backed by new, stronger measures, including:
- Multi-million pound fines for large businesses that persistently pay suppliers late.
- A mandatory 60-day maximum payment term in contracts involving large companies.
- Compulsory statutory interest on late payments (set at 8% above the Bank of England base rate).
- Significant new powers for the Small Business Commissioner to investigate, adjudicate and penalise poor payment practices.
These proposed reforms mark a step change in the way late payment is dealt with – comprising a move away from voluntary codes towards active enforcement and financial penalties.
Why Are Late Payment Reforms Required?
Late payments cost the UK economy approximately £11 billion annually. Around 38 businesses close every day due to cash flow pressures linked to unpaid invoices.
In the wider context, it is hoped the reforms will not only protect individual creditors but improve liquidity across the wider economy.
A New Role For The Small Business Commissioner
One of the most significant developments is the proposed transformation of the Small Business Commissioner from a largely advisory body into an active enforcement authority.
Under the proposed reforms, the Small Business Commissioner will be able to:
- Launch investigations into payment practices.
- Resolve disputes between businesses.
- Impose financial penalties on late payers.
This may offer businesses an alternative route to obtaining payment from traditional legal action.
What Do The Reforms Mean For Creditors?
For creditors, these proposed reforms strengthen existing rights that are available under The Late Payment of Commercial Debts (Interest) Act 1998. Specifically:
- Statutory interest will be mandatory – potentially normalising its use and increasing recovery sums.
- The prospect of regulatory investigation and fines may help to create additional pressure on debtor companies and in particular, large companies.
- Large companies will, potentially, be require to explain their poor payment practices publicly.
What Do The Reforms Mean For Debtors?
For debtors, these proposed reforms introduce a number of operational risks, including:
- Financial penalties for persistent late payment.
- Reputational damage through public reporting.
- Regulatory scrutiny of payment systems and practices.
As a result, businesses who have historically paid their suppliers late in order to increase their own working capital will need to reassess those practices as a matter of urgency.
Has The Government Produced Draft Legislation?
At the time of writing, the Government has not yet published a draft bill. However, press reports indicate that legislation will follow when parliamentary time allows.
What Should Businesses Do Now?
In light of today’s news, we recommend that businesses:
- Review their terms and conditions of business to ensure they will be compliant if/when the proposed reforms are made law.
- Carry out an internal audit of invoicing and payment practices to identity and mitigate risks.
- Prepare for greater use of late payment legislation to increase recoveries.
Conclusion
The Government crackdown on late payments is to be welcomed. For far too long, small businesses have suffered at the hands of unscrupulous businesses who fail to pay their suppliers on time.
Today’s announcement marks a shift in the way late payment is viewed and dealt with by central government. Increased regulation will replace voluntary codes of practice and hopefully make late payment a thing of the past.
If you would like advice on how these reforms affect your business or assistance with recovering unpaid invoices, our team of debt collection solicitors would be happy to assist.