Keir Starmer unveils late payments crackdown

At the heart of the UK Government’s new Small Business Plan is a historic crackdown on late payments, described as the most significant legislative reform in 25 years, aimed at tackling a practice that costs the UK economy £11 billion annually and forces 38 businesses to shut down every day.

“From builders and electricians to freelance designers and manufacturers—too many hardworking people are being forced to spend precious hours chasing payments instead of doing what they do best – growing their businesses,” said Starmer. “It’s unfair, it’s exhausting, and it’s holding Britain back. So, our message is clear: it’s time to pay up.”

The government’s late payment reforms include:

• New powers for the Small Business Commissioner to issue fines to large firms that routinely pay suppliers late.
• Mandatory 30-day invoice verification periods and enforceable maximum payment terms of 60 days, reducing to 45 days over time.
• Spot checks on large companies and legal obligations for audit committees to scrutinise payment practices.
• Mandatory interest charges on late payments, giving small businesses greater certainty and cashflow security.

Business and Trade Secretary Jonathan Reynolds called the plan “a Plan for Change in action,” emphasising its goal to “put more money in people’s pockets, boost local communities, and ensure Britain is a great place to do business and thrive.”

While the announcement has been widely welcomed, business leaders stress the need for follow-through.

“So far, attempts to crack down on this issue have failed to have meaningful impact, with our research revealing that 58 percent of SMEs believe the latest measures, such as the Fair Payment Code, don’t go far enough to protect them.

“However, this latest announcement is only the first step. Businesses need to see these plans convert into tangible action. Crucially, late payments are not an isolated issue. Bad debt, caused by non-payment or customer insolvency, is an equally challenging issue eroding profit margins of small businesses.

“With businesses facing wider economic challenges, such as supply chain disruption and stubborn inflation, it’s critical the government follows through and demonstrates its commitment to rebuilding SME confidence.”

“For too long, SMEs have been forced to bankroll their customers, with late payments causing serious cashflow issues and forcing many to take out personal guarantee backed loans just to stay afloat. The new laws will finally give small businesses the protection they deserve and help level the playing field.”

Unlocking growth through financial backing

In addition to tackling late payments, the plan includes a £3 billion expansion of the British Business Bank’s ENABLE programme, offering government-backed guarantees to unlock better loan terms for SMEs.

Other measures include:

• £1 billion for new entrepreneurs, including mentoring and Start-Up Loans.
• Permanent lower business rates multipliers for retail, hospitality, and leisure sectors.
• Revamped export support via a new Board of Trade.
• Slashing red tape for licensing and regulatory approvals.

The new measures have received support from industry leaders and business owners alike.

“Today’s plan is an encouraging commitment from the Government to take the side of small businesses in the great growth challenge ahead.”

Michelle Ovens CBE, Founder of Small Business Britain, called the plan “a huge boost to funding, skills and high street support,” while Charlie Shaw, owner of Flock and Herd butchers in Peckham, praised the focus on fairness: “We’re proud to pay every supplier on time… It’s fantastic to see the government put the Small Business Plan into place tackling the big issue of late payments.”

Consultation

The government has launched a public consultation on the proposed legislative measures to enforce fair payment practices.