UK government to introduce new laws on late payments

The UK government has announced plans to strengthen laws on late payments to suppliers.

Under the proposed plan, large firms will be required to pay small suppliers within 60 days, and late payments will carry mandatory interest. All commercial contracts will also include statutory interest set at 8% above the Bank of England base rate.

These new measures build on the 1998 Late Payment of Commercial Debt Act, and go further than any previous measures, aiming to boost the UK economy while giving small businesses better cash flow.

The Small Business Commissioner will receive new powers to investigate poor payment practices, adjudicate payment disputes, and penalise repeat offenders. Firms that consistently pay late or break the new laws could face significant fines.

The government also plans to ban the withholding of retention payments in construction contracts and will consult on the best way to implement this.

These changes are expected to be included in the King’s Speech in May. They follow the Small Business Plan launched by the Prime Minister last year, which included steps on late payments and introduced the Business Growth Service intended to transform government support for small firms and improve access to finance for SMEs and entrepreneurs.