Commercial Payments Bill [HL]

Baroness Dacres of Lewisham Excerpts

2nd reading
Tuesday 9th June 2026 Lords Chamber

[Baroness Dacres of Lewisham (Lab)]

My Lords, I welcome the opportunity to speak in support of the Commercial Payments Bill. It has been extremely interesting to hear the various points made by noble Lords, in particular the noble Baroness, Lady Alexander of Cleveden, and the noble Lord, Lord Holmes of Richmond. I thank my noble friend the Minister for his detailed and passionate introduction to this Second Reading.

The Bill deals with an issue that causes real frustration and damage to many small and medium-sized businesses across the country. Quite simply, too many businesses are not being paid on time for work that they have already completed. For large companies, delayed payments may sometimes be seen as an administrative issue or a cash-flow decision, but, for smaller businesses, late payment can mean sleepless nights, financial stress and serious uncertainty about the future. Many small firms are spending too much time chasing invoices instead of serving customers, training apprentices, creating jobs and expanding their businesses.

The scale of the problem is significant. Around 44% of invoices from SMEs are paid late, with late payments estimated to cost the UK economy £11 billion each year. Around 14,000 businesses close annually because of late payments. This should concern us all. Small businesses are central to both our economy and our communities. They employ local people and support our high streets, and they often provide opportunities for people starting out in work or setting up businesses of their own.

This legislation is a welcome step towards tackling a problem that has existed for far too long. I particularly welcome Clause 18, which strengthens the powers of the Small Business Commissioner to help resolve payment disputes between smaller and larger businesses. Many small businesses simply do not have the time, money or legal support that is needed to challenge unfair payment practices. Giving the commissioner stronger powers to investigate poor behaviour, resolve disputes and take enforcement action is an important step forward. The Bill gives the Small Business Commissioner powers not only to resolve disputes but to investigate persistent poor payment practices and take action against repeat offenders.

Clear maximum payment terms are particularly welcome. It cannot be right that some businesses wait months to be paid while themselves still being expected to pay wages, suppliers, rent and tax bills on time. The Bill rightly tackles the issue of late payment interest. If a business pays late, there should be consequences. Removing loopholes that allow companies to avoid statutory interest is therefore welcome.

These problems are especially serious in the construction sector, as we have heard from many noble Lords. Many construction subcontractors and specialist firms are small businesses operating on very tight margins. They may already have paid for labour and materials long before receiving payment themselves.

I have read the helpful briefing from Actuate UK, the engineering services alliance, which represents more than 60,000 firms, together with the Electrical Contractors’ Association, which represents businesses working across the electrical and engineering sectors. Their briefing highlights how retention can remove vital cash from small businesses for months and sometimes years. The briefing warns that these practices can leave smaller firms exposed if larger contractors collapse.

Clauses 11 to 17 represent an important step towards improving fairness in construction contracts. The collapse of Carillion showed the serious consequences that unfair payment practices can have across a supply chain. I support the Government’s intention to improve fairness in this area, including through the proposed ban on retention. As the Bill progresses, I hope that the Government will continue to listen carefully to concerns around enforcement and implementation.

One point I would make is that these protections will work only if smaller firms can realistically use them. Many SMEs simply cannot afford lengthy legal disputes or complex adjudication processes. Without practical enforcement, some smaller firms may still feel unable to challenge poor payment practices. Can my noble friend the Minister say more about how the Government intend to ensure that these new protections are genuinely accessible in practice?

There is a wider issue around business culture. Paying suppliers on time should not be seen as optional good practice; it should be part of being a reasonable business. When smaller firms are paid fairly and promptly, they are better able to invest, hire staff, support apprentices and contribute to local economic growth. That matters not only for individual businesses but for the resilience of local economies and supply chains more broadly.

As the Bill moves through this House, I hope that there will be careful consideration of how to prevent companies simply finding new ways around these rules and loopholes through different contractual arrangements or payment structures. The Bill sends a clear message: small businesses should not be expected to carry unfair financial risk while waiting to be paid for work that they have already completed. Fair and timely payments are not just about good business practice; they are about confidence and building a stronger, more resilient economy. I support the Bill.