UK Government Launches Landmark Bill to Crack Down on Late Payments to Small Businesses.
London:
The UK government has unveiled what ministers describe as the toughest crackdown on late payments in more than 25 years, as a landmark new Bill aimed at protecting small businesses officially enters Parliament.
The legislation, introduced by the Department for Business and Trade with backing from UK Prime Minister Keir Starmer and senior ministers, seeks to strengthen legal protections for small firms and self-employed workers who are struggling with delayed payments from larger companies.
According to government estimates, late payments currently cost the UK economy around £11 billion annually, placing severe financial pressure on businesses, threatening jobs, and forcing many firms to shut down.
Toughest Reforms in a Generation
Peter Kyle described the legislation as a major turning point for British businesses.
“Costing the UK economy £11 billion every single year, late payments choke growth, cost jobs, and force too many good businesses to close. That ends today,” Kyle said.
He added that the Bill would deliver “the toughest payment reforms in over a generation” and create what ministers believe will become “the strongest legal framework in the G7” for tackling delayed payments.
The proposed legislation builds upon the existing Late Payment of Commercial Debts (Interest) Act 1998, updating rules that were first introduced more than two decades ago.
Greater Accountability for Large Companies
One of the key reforms in the Bill will require boards and audit committees of large companies with persistent records of late payments to publicly explain their payment performance and outline measures being taken to improve it.
The government said the reforms were developed in close collaboration with the Federation of Small Businesses (FSB), which has long campaigned for stronger protections for small firms.
Tina McKenzie welcomed the legislation, calling late payment one of the biggest barriers facing smaller enterprises.
“FSB is proud to have worked with ministers on these reforms and it’s encouraging to see the voice of small firms reflected in legislation,” McKenzie said.
She added that assigning audit committees a direct role in overseeing payment practices was “a vital step in changing late payment culture.”
Support Package for Small Businesses
The legislation forms part of the government’s broader economic strategy to support small businesses and stimulate growth after years of economic uncertainty, high inflation, rising borrowing costs, and administrative burdens.
Ministers highlighted several measures already introduced or planned, including:
Small business rates relief of up to 100% for the smallest premises
Reduced childcare costs for working families
£2,000 incentives for SMEs hiring apprentices
Increased access to business finance
Reduced red tape for hospitality, cultural venues, and high street businesses
The reforms also follow the launch of the Prime Minister’s Small Business Plan last year, which aims to make the UK the best place to start and grow a business.
The plan includes £4 billion in additional financial support for small firms, simplified access to government contracts, and the creation of a new Business Growth Service designed to centralize business advice and funding support.
Focus on Economic Growth
Blair McDougall, Minister for Small Business and Economic Transformation, said the legislation was designed to restore fairness and stability for entrepreneurs and self-employed workers.
“I’ve spoken to too many business owners who do everything right and are still left lying awake at night wondering how they’ll pay their staff or cover their bills because they haven’t been paid what they’re owed,” McDougall said.
He emphasized that the reforms would allow business owners to focus on growth and innovation rather than financial uncertainty caused by overdue invoices.
If passed, the Bill is expected to significantly reshape payment standards across the UK business sector and strengthen protections for millions of small enterprises nationwide.
