Government moves to curb late payments

The UK government has unveiled plans for its biggest overhaul of late-payment rules in more than 25 years, aiming to curb a practice it says costs the economy billions each year and leaves thousands of smaller businesses vulnerable to cashflow shocks.

Under proposals published on Tuesday, large companies would face a 60-day maximum payment term when dealing with smaller suppliers, mandatory statutory interest on late invoices, and fines that could run into the tens of millions for persistent non-compliance.

The package would also expand the powers of the Small Business Commissioner, allowing the office to investigate poor payment practices, adjudicate disputes outside court, compel evidence, and check the accuracy of payment-reporting data. Ministers also want boards or audit committees at persistently late-paying large businesses to explain poor performance and set out corrective action, while companies would be required to report how much statutory interest they owe and how much they have actually paid on overdue invoices.

A separate measure would introduce a 30-day deadline for disputing invoices, designed to stop payment delays being prolonged through late-stage challenges. In construction, the government is also consulting on banning retention payments, a move intended to reduce the risk of smaller suppliers losing money through insolvency or non-payment. Together, the proposals push late payment beyond a narrow finance issue and further into the territory of governance, working capital discipline, and board accountability.

The detail matters as much as the headline. The reforms are not yet law, and the government said legislation will move forward only when parliamentary time allows. For the proposed 60-day payment cap, ministers said the change would come no earlier than 2027, with limited exemptions for contracts between two large companies, cases where the purchaser is the smaller party, and certain import or export arrangements. The consultation response also acknowledged a live concern among respondents that 60 days could become a default rather than a ceiling.

Since 1 January 2026, large companies already in scope of the reporting regime have had to include headline payment-performance data in directors’ reports. The new package adds commercial and regulatory consequences to that disclosure framework, drawing payment behaviour closer to audit scrutiny and investor attention at a time when supply-chain resilience remains fragile across many sectors.

Chris Richards, SVP International at Syspro, said: “Stronger payment discipline is good news for mid-market manufacturers and distributors. It brings much-needed stability to the supply chains they rely on.

“For smaller suppliers, predictable cash flow means they can plan, invest, and deliver with more confidence. That resilience flows upstream, improving reliability for manufacturers and reducing disruption across production and fulfilment.

“But it also raises the bar. As payment practices come under greater scrutiny, businesses need the operational visibility to manage this day to day, not just at policy level. That means knowing exactly what’s been ordered, invoiced, and approved, and where delays or disputes are building.

“In manufacturing and distribution, payment behaviour doesn’t sit in finance alone. It’s tightly linked to procurement, inventory, and supplier performance. The organisations that will benefit most from these changes are those with connected processes across those functions, giving them the control to strengthen supplier relationships and keep supply moving.”

That operational point may prove decisive. Stronger powers for the commissioner, tighter reporting, and harder payment limits may change the legal framework quickly. Changing behaviour across procurement, finance, and supplier management will take longer, and the success of the package will depend on whether large businesses genuinely shorten payment cycles in practice, rather than simply becoming more sophisticated in how delays are managed and disclosed.