The government has announced a crackdown on late payments to suppliers, with fines and penalties for repeat offenders. Business Secretary Jonathan Reynolds is set to unveil the measures on Thursday, describing them as the toughest action on late payments in a generation. The initiative aims to reduce the estimated £11bn annual cost to the economy.
According to the government, 38 businesses close each day partly due to late payments, affecting tradespeople, shopkeepers, and family-run firms. The Small Business Commissioner will receive powers to impose fines potentially worth millions, conduct spot checks, and set deadlines to clear dispute backlogs. Payment terms will be capped at 60 days initially, then reduced to 45 days.
The move is part of a wider Labour drive to support small businesses, including startup loans for 69,000 companies worth £4bn. Prime Minister Keir Starmer said: “It’s time to pay up,” adding that late payments unfairly burden small firms. The policy is backed by Chancellor Rachel Reeves amid recent economic contraction.
Small Business Minister Gareth Thomas noted that many businesses lack cash to start or grow, and the measures aim to address these issues. Audit committees will also be required to scrutinise payment practices at board level, with mandatory interest charges for late payers.
