New UK Late Payment Laws: How the Small Business Protections Bill Could Transform Business Cash Flow

The Government has introduced the Small Business Protections Bill to Parliament, proposing the biggest overhaul of UK late payment laws in more than 25 years. The legislation is designed to strengthen the rights of small businesses, improve cash flow and tackle the long-standing issue of large organisations paying suppliers late.

For many SMEs, sole traders and family businesses, late payment of invoices is more than an inconvenience. Delayed payments can create serious cash flow problems, restrict growth opportunities and, in some cases, threaten the survival of otherwise successful businesses. Government research estimates that late payments cost the UK economy around £11 billion every year, with approximately 38 businesses closing every day because they are not paid on time.

What Will the Small Business Protections Bill Change?

If the Bill becomes law, it will introduce several significant reforms to commercial payment practices.

The headline change is a maximum 60-day payment term for large businesses paying smaller suppliers. This aims to prevent larger organisations from imposing excessively long payment periods that leave SMEs funding projects for months before receiving payment.

The legislation will also make late payment interest compulsory, with interest payable at 8% above the Bank of England base rate. This strengthens the existing legal framework and provides businesses with greater certainty when pursuing overdue commercial debts.

Another major development is the expansion of the Small Business Commissioner's powers. The Commissioner will be able to investigate poor payment practices, determine payment disputes and impose substantial financial penalties on businesses that consistently fail to pay suppliers on time. Persistent offenders may also be required to publicly explain their payment performance and the action they are taking to improve it.

The Bill also proposes banning the practice of withholding retention payments under many construction contracts, providing greater protection for contractors and subcontractors.

What Should Businesses Do Now?

Although the legislation is still progressing through Parliament, businesses should begin reviewing their commercial contracts, payment terms and credit control procedures. Larger businesses should assess whether their payment practices will comply with the proposed legislation, while SMEs should ensure they understand the additional protections likely to become available.

Taking proactive legal advice now can help minimise future disputes and ensure your business is well prepared for these important changes.

Commercial Debt Recovery Solicitors

At Clapham & Collinge LLP, our experienced commercial solicitors advise businesses across Norfolk and beyond on commercial contracts, late payment disputes, debt recovery, contract enforcement and wider commercial litigation.

If your business is experiencing payment delays or you would like advice on how the proposed Small Business Protections Bill may affect your contracts and trading relationships, our team is here to help. Contact us today for practical, commercially focused legal advice.

Offices:

Norwich — 01603 693500

Sheringham — 01263 823398

North Walsham — 01692 660230

Email: enquiries@clapham-collinge.co.uk

The information in this article is for general guidance only and should not be treated as legal advice. It is not a substitute for obtaining advice tailored to your circumstances. While we aim to ensure accuracy at the time of publication, laws and guidance may change. Clapham & Collinge LLP accepts no liability for any loss arising from reliance on this content. For personalised advice, please contact our client relations team to book an appointment.