Tougher late payment rules aim to alter boardroom behaviour amid persistent small business struggles

The King’s Speech has pushed late payment back to the centre of the corporate agenda, but the real question is whether tougher rules will change behaviour in boardrooms or simply add another cost for serial offenders.

For many small suppliers, payment delays are not a routine irritant but a structural weakness in the way larger businesses manage cash, purchasing and accountability. Poor payment discipline can fracture long-standing commercial relationships, interrupt deliveri...

es and, in the worst cases, leave smaller firms struggling to survive. Industry and government figures have long suggested the scale is substantial, with the Office of the Small Business Commissioner estimating that late payments cost the UK economy almost £11 billion a year and affect more than 1.5 million businesses.

That backdrop helps explain why ministers have been returning repeatedly to the issue. In March 2026, the government announced a package of measures that gives the Small Business Commissioner new powers to impose financial penalties on large companies that persistently pay late, while also introducing an adjudication function to settle disputes outside court. Officials have said the changes are designed to make Britain’s late-payment regime the toughest in the G7.

The latest push builds on earlier attempts to tighten the rules. Back in 2020, the government proposed giving the commissioner the ability to order timely payment, demand more disclosure on payment practices and open investigations into bad behaviour. The 2017 launch of the commissioner itself was intended to promote a culture of prompt payment, but the problem has clearly proved stubborn.

The current debate also comes as ministers are promoting electronic invoicing more actively, including as part of the 2025 Budget. Advocates argue the two policies should reinforce one another: if invoices are standardised and processed digitally, businesses should have better visibility over liabilities and fewer excuses for delay. The implication is that enforcement alone will not solve the problem if finance functions remain reliant on fragmented manual systems.

That point is reflected in the Small Business Commissioner’s own approach. The office, which was created under the Enterprise Act 2016, says it exists to help smaller firms resolve disputes and challenge poor payment conduct in the private sector. It also operates the Fair Payment Code, a tiered award scheme with Gold, Silver and Bronze levels intended to encourage better practice.

For supporters of reform, the direction of travel is welcome. But the deeper test will be whether the new framework changes incentives inside large organisations, forcing them to treat prompt payment as a matter of governance rather than a discretionary cash-flow strategy. If not, the risk is that companies simply budget for the penalties and carry on as before.

Source: Noah Wire Services