Late Payments Consultation: Government Response

Blair McDougall Excerpts

Tuesday 24th March 2026 Written Statements

[The Parliamentary Under-Secretary of State for Business and Trade (Blair McDougall)]

This Government believe that business is the driver of growth and wealth everywhere across Britain. A thriving private sector is the single most powerful engine for improving livelihoods and places. The UK has some of the best, most innovative businesses in the world, and the most talented leaders and entrepreneurs of any nation.

In turbulent times, this Government are backing business with a deliberately more active state that is going further than previous Governments to back businesses, tackling reforms that previous Governments neglected, and prioritising the strongest reforms in decades to get more cash in the bank sooner for Britain’s small businesses.

The role of business in the Britain we are building is not just to plug gaps in the finances left by the last Government. Only with a thriving private sector can we change the country for the better. We will be more interventionist than our predecessors in backing the British business community to build and scale great companies.

In that context, today we are publishing the Government response to the late payments consultation which ran from 23 July to 31 October 2025.

In the response, we set out the measures we will take forward to tackle the scourge of late payments, forming the most ambitious reforms in over 25 years and giving the UK the strongest legislative framework on late payments in the G7. These measures will help deliver on the Government ambition to make the UK the best place in the world to start, run, and grow a business.

Late payments cost the UK economy £11 billion each year and lead to the closure of 38 UK businesses every day. On average, each business owner affected by late payments wastes 86 hours each year chasing invoices, amounting to a staggering total of 133 million hours across UK businesses. This hurts productivity, damages supply chains and erodes cash flow.

The impact of the status quo is clear: wasted time and wasted resources, and too many businesses that struggle to pay their hard-working employees on time and invest for the future. Our measures tackle this problem head-on, driving productivity and investment, and freeing up cash so that businesses can survive, thrive, and grow.

The consultation received more than 850 responses from across the UK. We are grateful for the interest, time, and expertise that stakeholders have put in to help us get this right.

The proposals within the consultation received strong support. Respondents overwhelmingly agreed with the importance of paying smaller businesses quickly and on time. We will strengthen the powers of the small business commissioner, giving them powers to investigate, fine and adjudicate. We will introduce strong maximum payment terms of 60 days, mandatory interest on late payments, a time limit for disputes and increased board level scrutiny. We also propose to prohibit the deduction of retentions in construction contracts but, given the ambition of the policy, we will consult further on the impact of this measure before taking a final decision on implementation.

This Government will continue to work with businesses and organisations across the UK economy to make these reforms a success. These changes will complement the efforts of the vast majority of UK businesses already committed to excellent payment practice, and through arming smaller businesses against the scourge of late payments, improve productivity and cash flow.

We will make sure that small businesses are paid on time, every time.

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