A bill is currently making its way through parliament that aims to deliver the toughest crackdown on late business payments in a generation. If passed, the proposed “Small Business Protections” bill will impose a 60-day cap on business-to-business invoice payment times for large firms and a 30-day cap for public authorities.
What does the Small Business Protections bill mean for businesses?
The bill builds on the Late Payment of Commercial Debts Act of 1998. But to give it added teeth, all commercial contracts will be required to provide for statutory interest at 8% above the Bank of England base rate on all late payments. Payments are considered “late” if they are not made within 30 days after the customer receives the invoice or the goods/services.
“Late payments close 38 businesses every single day because they are not paid on time,”
notes the government’s press release. “That’s the equivalent of 266 a week, and well over a thousand in any given month. For business owners, the impact is immediate and personal – forcing them to spend hours chasing invoices instead of running their businesses and putting jobs and livelihoods at risk.”
The government wants to change this. Through the proposed legislation, it hopes to turn the UK into the "toughest late payment regime in the G7". To that end, the Small Business commissioner will obtain “major new powers to investigate poor payment practices, adjudicate disputes, and fine the worst offenders.” Those fines could apparently rise into the tens of millions.
Late payments may not be a new problem, but they are certainly a growing one. Recent research by Sage points to the scale of the challenge, with late payments estimated to cost the UK economy some £11 billion each year. Chronic late payments clearly act as a drag on the ability of businesses to invest, hire and grow, the UK tech company warns.
Nearly half of all SME invoices (49%) are overdue, with businesses waiting an average of 27 days to receive payment after issuing an invoice. The delays appear to be having a domino effect across the economy, Sage cautions, with SMEs themselves now taking, on average, 37 days to pay supplier invoices, up from 32 days in Q1 2025.
Other data seem to confirm this trend. According to the Quarterly Business Health Report from
R3, the UK’s trade body for restructuring, turnaround and insolvency professionals, late payment pressures rose in Q1 2026, with the total number of overdue invoices growing to 17.48 million, up 3% on Q1 2025. The number of businesses carrying overdue invoices also grew to 1.57 million.
As we noted in our previous article, Britain’s small business sector continues to show signs of resilience as profitability in the sector outperforms the broader economy. This is despite the cash-flow pressures resulting from late payment. If the government’s Small Business Protections bill passes parliament, those pressures should begin to subside.
