The Department for Business and Trade has published its consultation response on late‑payment reforms and, in a parallel letter to CEOs and CFOs, set out the steps companies should take now. Ministers cite the scale of the problem: an estimated £11 billion annual cost, around 38 business closures per day, and 133 million staff hours lost to chasing invoices. The legislative package will be brought forward “as soon as Parliamentary time allows”. (gov.uk)
The response confirms an intended statutory cap of 60 days for business‑to‑business invoices, subject to limited exemptions where both parties are large, where the purchaser is the smaller party, or for import and export transactions. Statutory interest at eight percentage points above the Bank of England base rate would become a mandatory remedy in all commercial contracts, removing contractual opt‑outs. A time limit would be set for raising invoice disputes, after which compensation would be payable. Persistently late‑paying large companies would have to publish board‑approved commentary on GOV.UK explaining causes and corrective actions. The Small Business Commissioner (SBC) would gain powers to investigate suspected poor practice, adjudicate payment disputes and levy proportionate fines; large companies would also have to report interest owed and interest paid. (gov.uk)
The Minister’s letter asks finance leaders to begin aligning supplier terms to a 60‑day ceiling, ensure systems can accrue and pay statutory interest, continue twice‑yearly reporting under existing rules, and prepare for new annual directors’ report disclosures on supplier payment performance for financial years beginning on or after 1 January 2026. These immediate actions track duties in the Reporting on Payment Practices and Performance Regulations 2017 and the Companies (Directors’ Report) (Payment Reporting) Regulations 2025. (assets.publishing.service.gov.uk)
Scope remains tied to the Companies Act “medium‑sized” test. From 6 April 2025 the thresholds used to determine which businesses must report are £54 million turnover, £27 million balance sheet total and 250 employees, with equivalent group thresholds. Guidance confirms these revised thresholds apply when assessing scope and should be applied retrospectively for the two‑year size test. (gov.uk)
Enforcement will leverage transparency data. Government intends to use information reported under the 2017 regime to identify persistent late payers against a trigger point, enabling SBC investigation and, where appropriate, financial penalties. Ministers have rejected moving the duty‑to‑report from twice‑yearly to annual after respondents flagged reduced transparency. Board‑level commentary for late‑paying large companies, together with new reporting on statutory interest owed and paid, is designed to create strong governance pressure to improve performance. (gov.uk)
Construction faces the most structural change. Government proposes to prohibit retention clauses in construction contracts, with further consultation before implementation. In the meantime, additional transparency applies: for financial years beginning on or after 1 April 2025, in‑scope large companies using qualifying construction contracts must report retention practices and performance in their payment reports, ahead of any prohibition. Alignment with the Housing Grants, Construction and Regeneration Act 1996 will be taken forward. (gov.uk)
Territorial coverage is intended to be UK‑wide. As late payments is a devolved matter, DBT will work with the Scottish, Welsh and Northern Ireland administrations under the Late Payment Common Framework to secure alignment. (gov.uk)
Timing remains subject to Parliament. The reforms require both primary and secondary legislation; DBT commits to close engagement and guidance through implementation. The Minister underscores the policy intent in his covering letter: once in force, the cost of delay should fall on the non‑payer, not the supplier. (gov.uk)
Corporate reporting is tightening in parallel. Large companies must include supplier payment information in the directors’ report for financial years beginning on or after 1 January 2026 under the 2025 Regulations. Separately, the SBC’s Fair Payment Code is presented as good practice, with more than 550 awardees including BT, Aviva, AstraZeneca, BAE Systems, Heathrow Airport, Barclays, Lloyds Banking Group, HSBC and NatWest. (legislation.gov.uk)
What this means for finance and procurement teams: begin a contracts audit to default terms to 60 days where no exemption applies; design processes to calculate, accrue and pay statutory interest on overdue invoices; map duty‑to‑report obligations and new interest‑reporting proposals; brief audit committees on the prospective public commentary requirement; and, for construction, refresh retention reporting now and prepare for a further consultation on prohibition. (assets.publishing.service.gov.uk)