Commercial Payments Bill [HL]

Debate between Lord Sharpe of Epsom and Lord Holmes of Richmond

Committee stage
Tuesday 21st July 2026 Lords Chamber

[Lord Sharpe of Epsom (Con)]

My Lords, it is a pleasure to introduce group 4, which primarily covers the important issue of the definitions of different sized businesses. Before I open that debate, I will touch on the other amendments in this group.

Amendment 18, which was signed by my noble friends Lord Hunt of Wirral and Lord Holmes of Richmond, probes the expected impact of exempting upward payments from the new payment terms. As a preliminary question, what economic impact do the Government specifically consider new Section 2E(2) will have? The Government’s argument is that the Bill will prevent the late payments that cost the United Kingdom £11 billion and cost small businesses almost eight days a year in chasing overdue invoices, yet they are exempting upward payments, including those from micro and sole undertakings, to small businesses. I understand that smaller businesses often appear more vulnerable and will often have tighter margins and a smaller cash flow, but that does not mean that the supplier, especially if it is also a small business, can necessarily take the hit of an indefinite or delayed payment term.

More broadly, the purchaser almost always has the power in a contractual agreement. They are the ones who hold the capital. Exempting upward payments merely because the purchaser is smaller will exempt contracts that really should fall under the scope of the Bill.

That brings me to the most long-standing issue this group addresses, which is the definition of businesses. There are currently at least six different definitions in law of business sizes. There are the Companies Act 2006, the Enterprise Act 2016, and the Small Business, Enterprise and Employment Act 2015. Standard settlers use the definition “less complex entities”, while this Bill uses the Procurement Act 2023, alongside giving the Secretary of State powers to make definitions.

We are not arguing that discretion is not needed in separate areas of policy, but it is widely thought that we have reached the point of confusion. At the very least, any new definition created under this Bill should not differ from any pre-established definition; that is the argument that Amendment 22 is attempting to make.

In a more ideal scenario, Amendments 20, 21, 23 and 101 attempt to offer a new standardised definition of business sizes that we believe more accurately represents the nature of today’s economy. Currently, the most used definitions in the Companies Act use a numerical number of employees as a factor in defining the size of a business. The amendments in my name, alongside those of my noble friends Lord Hunt of Wirral and Lord Holmes of Richmond, aim to replace this nominal headcount with a full-time equivalent number of employees.

I offer just one important example of the importance of this change. In doing so, I thank UKHospitality for its campaign on this issue. Members of the hospitality industry often hire more than the threshold 50 or 250 employees at their venues or events, but do so on shorter, low-hours contracts. While they may therefore have an employee count well over the threshold, it often does not reflect the amount of work that is being done by these employees. We believe that the Government should be able to offer a more nuanced system that more accurately reflects the amount of labour that a business employs.

Finally, exacerbating this amalgam of definitions is the lack of public information about which business falls where. Restricting the definitions of businesses is important, but I pre-empt that the Minister will argue that this Bill is not the vehicle for that discussion. In a sense, he is quite right. Under new subsection (7) in Clause 3, the Secretary of State could define small businesses as those with £100 million turnover. It would not matter if businesses did not know which partners fell under this definition. This is hyperbole, but it illustrates the point that, without some form of database through which businesses can see who falls under which payment term in this Bill, definitions have little meaning. At the very least, businesses will be forced to complete the administrative work themselves.

In speaking to industry representatives in preparation for this Bill, there has been general consensus that Companies House is not fulfilling this role. The Bill aims to create more symmetry between different-sized businesses, yet that cannot be achieved if there is obscure or asymmetrical information. Can the Minister confirm today that he will look into the efficacy of Companies House and, if need be, provide additional support for businesses so they do not have the burden of defining businesses themselves placed upon them? I beg to move.

[Lord Holmes of Richmond (Con)]

My Lords, I support my noble friend Lord Sharpe, having signed all the amendments in his name. There are two key principles at stake here, as he eloquently set out: first, not to introduce yet another definition and, secondly, to take the opportunity to bring some clarity, consistency and coherence of definition. This would not just be beneficial for this Bill but have benefits far beyond it. As he rightly set out, this Bill may not be the place for that second objective. It is obviously the place for the first but, if it is not the place for the second, it would certainly seem to provide the right level of focus and spotlight to enable the department to look at this and bring forward plans to have definitions and classifications that are clear and consistent but also provide what anybody in whatever size of business they are involved with needs. So those definitions are useful.

--- Later in debate ---

[Lord Holmes of Richmond (Con)]

My Lords, I look forward to the debate on this group. Amendment 24 is incredibly straightforward. It requires that the purchaser calculates the interest and makes the payment in all circumstances because they have the means and the resources and are in the position to do such. In doing that, it does not just lead to an efficient process; crucially, it means that the relationship between the parties is maintained and not adversely affected as a consequence of these provisions. I beg to move.

[Lord Sharpe of Epsom (Con)]

My Lords, I thank my noble friend Lord Holmes of Richmond for this amendment. I am sorry that noble Lords have caught me eating a toffee, which was a terrible error.

The ability to charge statutory interest on late payments was established by the Late Payment of Commercial Debts (Interest) Act 1998. That Act, however, introduced that right only as a right to charge, which many businesses may choose not to exercise out of fear of damaging commercial relationships or losing out on contracts. With this Bill, statutory interest becomes an implied mandatory term of a commercial contract. Therefore, the interest will accrue automatically on overdue payments and the burden will not fall on the suppliers to claim that interest.

The amendment from my noble friend seeks to ensure that late payment interest is paid to a supplier within five working days. It further provides that where statutory interest is not paid within that timeframe, the unpaid interest will itself form a part of the qualifying debt and therefore be liable to a further charge of statutory interest. While we support this policy, we must ensure that businesses, particularly SMEs, are given adequate time to adapt to the new regulations.

The impact assessment recognises that small and medium-sized businesses will shoulder

“a higher proportion of net costs”

associated with this policy. It further states:

“The policy does not create specific mitigations for SMEs, rather information will be provided to all business, to support their understanding and complying with the new policy requirements, in line with previous guidance issued on statutory interest”.


Those words might not be particularly comforting for many small businesses that are already struggling. Might I suggest that the Government do a little more to explain precisely how they will support those businesses? What kinds of information will they provide?

I have tabled an amendment to the commencement clause of the Bill, to be debated later, which would prevent that clause being brought into force for one year. That is the kind of measure that will give businesses the time to adapt, understand the new guidance and prepare for the new regime. I hope that when we come to debate that amendment, the Minister will give it serious consideration.

Employment Rights Bill

Debate between Lord Sharpe of Epsom and Lord Holmes of Richmond

Report stage
Wednesday 16th July 2025 Lords Chamber

[Lord Holmes of Richmond (Con)]

My Lords, I will be blessedly brief. I tabled a similar amendment on this issue in Committee to ask the Government, through the Bill, to introduce regulations to designate a body to bring clarity, consistency and fairness and, in effect, to level the playing field in this area of umbrella businesses, on which the Bill is curiously silent. These entities differ dramatically from other sectors of the employment market, the recruiter market and many other sectors of the economy in not having consistency and clarity of approach in how they are treated.

My amendment in Committee suggested the designation of a body to address this issue. At that stage, it was taken by the Government and others around the Committee that I was suggesting the creation of an additional body. Not a bit of it. It was about the designation of an existing body rather than the creation of a new one. With this amendment on Report, I have moved that on and seek to ask the Government to introduce regulations to ensure that existing codes of practice in good standing—ways of operating that all bona fide businesses in this sector of the market already adhere to—apply to all umbrella businesses.

This extraordinarily moderate amendment would bring fairness, clarity, consistency and a levelling of the playing field. I very much hope the Government will accept it. I beg to move.

[Lord Sharpe of Epsom (Con)]

My Lords, I thank my noble friend Lord Holmes of Richmond for his Amendment 110. What this amendment does is simple but important. It encourages the Secretary of State to ensure that in bringing forward regulations under the Employment Agencies Act 1973, they draw upon existing recognised certifications and industry standards. These standards, developed and refined by responsible actors within the market, offer a ready-made baseline for compliance which the Government can and should use.

There is consensus that regulation of umbrella companies is overdue, but as we take this opportunity, let us ensure that the regulation is done well and in a way that is pragmatic, proportionate and effective. This amendment helps point us in that direction, so I hope the Minister can offer some reassurance that the spirit of the amendment will be reflected in the Government’s approach to umbrella companies.