UK ministers have set out a late‑payment reform package with four elements: a legal cap of 60 days on payment terms from large companies to smaller suppliers; a requirement for all commercial contracts to include statutory interest on late payments at 8% above the Bank of England base rate; expanded powers for the Small Business Commissioner (SBC) to investigate, adjudicate disputes and levy multi‑million‑pound fines; and board‑level explanations from persistent late payers. Ministers will also consult on banning construction retentions. The Department for Business and Trade announced the package on 24 March 2026, describing it as the toughest in the G7. (gov.uk)
Under existing law, businesses may charge ‘statutory interest’-8% above the Bank of England base rate-on overdue commercial debts, alongside a fixed‑sum compensation. Government guidance sets out how to calculate and claim this interest. (gov.uk)
Policy purpose and scale are clear: ministers reference an estimated £11 billion annual cost to the economy and around 38 business closures a day linked to late or non‑payment, underscoring why tighter, enforceable rules are being brought forward. (gov.uk)
Large companies are already required to disclose payment performance twice yearly under the Reporting on Payment Practices and Performance Regulations 2017, which were extended for seven years from April 2024. The new package would add board or audit‑committee statements for persistent late payers, strengthening internal oversight. (gov.uk)
In construction, ministers intend to consult on retention payments with the stated aim of preventing losses to smaller firms from upstream insolvency or non‑payment. Earlier policy work highlights how retentions create systemic cash‑flow strain across supply chains. (gov.uk)
The SBC’s role would expand materially, with investigatory powers, dispute adjudication and significant civil penalties for repeat offenders flagged in official communications over the past year. (smallbusinesscommissioner.gov.uk)
Timings remain to be confirmed. The ‘Late payments: tackling poor payment practices’ consultation closed on 23 October 2025, with a government response scheduled for early 2026 and an intention to legislate when parliamentary time allows. Today’s announcement does not set a commencement date. (gov.uk)
Policy Wire analysis: For large buyers, a statutory 60‑day ceiling will necessitate shorter invoice approval cycles, tighter dispute‑verification windows and revised standard terms. Finance and procurement teams should identify supplier cohorts currently on 75–90‑day terms and map a staged reduction to ensure compliance once commencement dates are set.
For SMEs, embedding statutory interest in contracts and a stronger SBC enforcement route should reduce the administrative drain of chasing debt. Credit‑control processes can be calibrated to apply interest and the fixed‑sum compensation automatically after due dates, reserving escalation for disputed invoices.
Sector reaction is supportive. The Federation of Small Businesses welcomed the package as ending the use of small firms as free credit and described 60 days as an absolute cap while urging movement toward 30‑day norms across supply chains. (gov.uk)
Policy Wire analysis: Because statutory interest already exists in law, the policy shift lies in mandating it within contracts and pairing this with fines and adjudication by the SBC. Combined with board‑level reporting, this raises the legal, financial and reputational cost of paying late and is likely to reset norms for large‑to‑small transactions. (gov.uk)
Next steps: watch for the government’s formal consultation response, the draft legislation setting the 60‑day cap and enforcement powers, and the construction‑specific consultation on retentions. Businesses should begin contract and process reviews now, pending commencement. (gov.uk)