Late payments: What the government is proposing and what small businesses told us

Late payment still warps how small firms operate. It drains time, kills trust and starves businesses of cash when they need it most.

The government's analysis shows the cost to the UK economy is almost £11 billion a year, causing 38 businesses to close every day.

That's the backdrop to the Department for Business and Trade's (DBT) consultation on tackling poor payment practices. The consultation runs until 23 October.

We brought DBT officials together with Enterprise Nation members to test the proposals against real experience.

The following summary combines DBT's initial intentions with what small business owners told us in the room.

DBT policy leads opened the session by setting out the scale of the problem and the direction of travel:

• Tackling late and long payments

• Spurious disputes raised at the 11^th hour

• Sector-specific issues such as retentions in construction

The consultation in brief

DBT is consulting on a package aimed mainly at large businesses – those that are over the thresholds for headcount, turnover or balance sheet – on the logic that cash released at the top should flow through supply chains.

Officials recognised it was common for payments between small firms to be late, but said the biggest prize sits with large buyers. These are the measures currently on the table:

• Scrutiny of payment practices at board or audit committee level

• A legal cap on payment terms at 60 days, with the option to cut to 45 later

• A rule that invoice-related disputes must be raised within 30 days

• Automatic statutory interest on late payments

• Public reporting on how much statutory interest is owed or paid

• Financial penalties for persistent offenders

• Stronger powers for the Small Business Commissioner

• Whether to keep reporting twice a year or move to annual reports

DBT also highlighted specific problems around retention payments in construction, where retained money can be lost through upstream insolvency or delayed indefinitely.

Transparency and visibility

Several founders asked for a simple way to see who the repeat offenders are. DBT pointed to the government's existing reporting service, which suppliers can use to check a large customer's average payment time and how often they pay late. But awareness of the service is low.

Officials were clear that the government won't run league tables – an idea that's been tried before and dropped – but other organisations such as Good Business Pays already use the data to shine a light.

There was appetite in the room for both pressure and pride: a positive badge for firms that pay fairly and fast, and even a Glassdoor-style review tool suppliers could use to rate payment behaviour.

DBT added that a new enforcement team is now in place to make sure businesses both report and pay on time, and that the Small Business Commissioner will do more to raise awareness of the tools that already exist.

"It would help to have a simple badge that says: this business pays fairly and fast." – Enterprise Nation member

It isn't just big vs small

Attendees pressed DBT on whether tackling large firms alone would solve the issue. Many stressed the problem often sits between small businesses too.

One Enterprise Nation member remarked that some firms use suppliers "as a bank" when squeezed by HMRC.

Exporters flagged overseas customers as a major source of delay, while several noted that many counterparties that feel large in practice still fall below the UK's legal thresholds. The consensus: targeting large firms is necessary, but it won't solve every case.

Certainty over speed

The strongest theme was that certainty matters more than shorter terms. One founder described chasing unpaid invoices as "soul destroying".

Seasonal sectors warned that predictable 90-day cycles can be workable, but a hard 60-day cap could disrupt models overnight.

Others worried that if 45 or 60 days becomes mandatory, companies that currently pay faster will simply default to the maximum.

"If I know cash comes in at 90 days, I can plan. Cutting to 60 doesn't help if it's still uncertain." – Enterprise Nation member

As several attendees put it, the challenge is to lift the floor without lowering the ceiling. Some longer terms are part of a quid pro quo, a lower price in exchange for 90 days, often agreed verbally.

Owners asked how those deals sit with a legal cap. DBT's answer was that the package is aimed at large buyers first, to change norms and push cash down the chain.

Procurement and penalties

On procurement, the mood was firm: no-one wanted to see serial late-payers winning government contracts. Officials noted that Cabinet Office rules already ask that bidders show evidence of their payment performance, and that stronger levers are in play.

Financial penalties divided opinion. Some argued big companies would treat fines as a cost of doing business and pass them on to customers. Others thought the financial hit would bite if set at the right level.

"Fines work when they hurt. If they don't, they're just a line in the budget." – Enterprise Nation member

Statutory interest and disputes

Automatic statutory interest at 8% above the Bank of England base rate drew cautious support. Owners said it could help get invoices paid on time, but few were keen to claim it in practice for fear of damaging relationships.

"We've never charged the interest that's in our T&Cs, as we don't want to blow up a relationship." – Enterprise Nation member

The practical fix that several people suggested was automation. If accounting software could calculate and apply interest automatically when terms are breached, the nudge would work without adding manual admin or escalating tension.

The proposed 30-day window for disputes also landed well once DBT clarified its intent. If a dispute is raised after 30 days, the paying party still has to pay on the agreed date and then pursue the claim.

That reassurance spoke directly to owners who have seen concerns raised on the very last day of a term to drag payment out further.

Culture and positive practice

Several attendees said legislation alone will not fix this. Cultural change and public awareness are just as important, so customers understand that paying late has real human costs.

There was pride in the idea that the UK could lead the G7 if this package works, but a warning that it needs a sustained campaign alongside.

"It'd be good to be proud of the UK for being first, but it needs a campaign so people get why paying late hurts others." – Enterprise Nation member

Others spoke about the example that small firms can set. One business pays in advance or on receipt, seven days at most, to secure better service and build a reputation for fairness.

Another suggested digitising the Italian practice of forward-dated cheques into scheduled bank transfers, to give recipients more certainty over exactly when the cash will arrive.

How to have your say

The session closed on a constructive note. Many said they would be proud if, done well, this package could make late payment far rarer across UK supply chains.

Want to respond to the consultation? You can do so at GOV.UK now. It runs until 23 October 2025.