Commercial Payments Bill [HL]

Lord Leigh of Hurley Excerpts

2nd reading
Tuesday 9th June 2026 Lords Chamber

[Lord Leigh of Hurley (Con)]

My Lords, I welcome the Bill and refer your Lordships to my business interests, which are largely in the SME sector, as set out in the register.

I thank the noble Lord, Lord Leong, for his very gracious remarks about the contribution the Conservatives have made to the Bill—the continuing line. I ought to fess up: I am not sure that the Conservatives have always led the way in this. I remember going to a speech that my noble friend Lord Heseltine, not in his place, gave. It was literally 30 years ago, but it was such a powerful speech that I can remember it. It was at the Institute of Directors, largely with small businesses there, and he was describing his business career. He explained that when he started off, he had a ledger in which he listed all the bills payable. The first column was “Bills 30 days” and the second column was “Bills over 60 days”. The third column was “Bills 120 days”. The fourth column was “Bills where solicitor’s letter has been received” and the fifth column was “Winding-up order has been received”. He said to the Institute of Directors, “Gentlemen and ladies, my advice to you, to be a success in business, is only pay the bills in the fifth column”. Not a great precedent, but a true story.

This is an important Bill and I believe it will be supported on a cross-party basis. It is something close to my heart, not least, as with the noble Baroness, Lady Thornton, because of my family history. Like many people in this House, I come from an entrepreneurial family. Both my grandfathers were originally in the furniture business, which led to my mother, after a successful career as an actress, deciding also to go into the furniture business. She discovered that in the East End of London in the 1970s and 1980s, there were a large number of craftsmen who made reproduction furniture. They worked under the railway bridges, some of them manufacturing reproduction furniture with wood, some doing the brass, some doing the lining and some doing the glass, but they were not combined, any of these businesses. She started taking furniture from one craftsman to another, and then took it all the way from the East End to the West End to sell it. None of those manufacturers could imagine “going up west” to sell their products, so she took the furniture there and sold it to the large department stores.

Now, it was a big learning curve for her: she had a great eye for business and a certain business acumen, but she did not have much business experience and she was busy juggling a family life. It turned out that the first meeting with the buyer in this upmarket West End department store was during the school holidays, and she was obliged to take my younger brother. The meeting went well and an order was about to be placed, when the experienced buyer said to my mother, “Now, Mrs Leigh, what are your terms?”, and she had no idea what that meant. Fortunately, my younger brother, aged 12, was in the room and he piped up, “2.5%, 30 days; 5%, seven days”. “Fair enough”, said the buyer, and the order was placed.

In those days, it was absolutely normal for a discount to be given for payments made in anything like a reasonable time. Needless to say, the buyer took the 50% discount and paid 60 days later. Sadly, there was not much that could be done about it. In fact, most businesses, as has been said, did not have the resources to cope with that sort of thing, particularly in the days of very high interest rates, so late payments is in my family folklore. Clearly, businesses need to have this situation remedied, but I cannot help feeling, as perhaps others do, that it is a shame that a common-sense issue such as this needs some 60 pages of legislation to be regularised, with some quite turgid and difficult clauses, and the heavy hand of government has to come in, for reasons everyone does understand, but it is regrettable that this is necessary.

There is a huge amount to discuss in this Bill. Later I will come on to some matters that are not in it but might be. I will focus on one area: the role of the aforementioned Small Business Commissioner, which comes from the Enterprise Act 2016—I see one or two familiar veterans on the other side of the House who worked on it. I note that the Government are using the definition of SMEs from the Procurement Act 2023. There are quite a lot of other definitions around; there is one in the Companies Act and we have the term “less complex entities” used by standard setters elsewhere. Perhaps the Government could start off by trying to find one definition for SME companies.

As my noble friend Lord Lansley pointed out, the concern is that most small businesses will frankly not have the time or energy to use an adjudication system in the way the Government anticipate. They will not want to enter it because they will not want to get into conflict with their customer. In a perfect market, the customer can choose which supplier they prefer, and no supplier wants to be deemed to be part of the “awkward squad”. I do not understand how this will work in practice and will be interested to hear the Minister’s thoughts. It seems to me that, by the time anyone has brought a specific complaint about late payments to the Small Business Commissioner, it will have been settled long since. All we are talking about here is timing, not whether the debt is actually due. Will the SBC have a 24-hour service seven days a week? I am keen to know more.

Some of this might be covered in the regulations, not yet published, which Clause 18 anticipates. Once again, the Government are tantalising us with what might come at a later date. I very much hope we will see drafts of these regulations as the Bill progresses through your Lordships’ House, because in this instance, as ever, the devil is in the detail. It is entirely possible that the proposal for adjudication may be redundant unless a quick and effective mechanism is put in place.

Particularly interesting to me is Chapter 2 of Part 2, which will allow investigation into payment practices—not specific instances but whole practices. It is not quite clear from the Bill exactly what would trigger an investigation and who can do so. The Bill says that a large business can be investigated where it

“‘persistently’ engages in poor payment practices”,

but we need to know what “persistently” means. The wording in the Bill and the Explanatory Notes, which I have read, is not clear. Worryingly, it will allow the Small Business Commissioner not to progress matters if it does not feel that it has the necessary resources. That cannot be satisfactory, because it is less likely to have the necessary resources in respect of a very large business. Why should it get off simply because the SBC feels it does not have the necessary resources? I look forward to debating this and other areas as the Bill progresses.

As I mentioned, I want to raise something that is not in the Bill but might be, which is particularly relevant to the relationship between SMEs and their large customers. There is a growing and worrying trend of large companies forcing their suppliers to comply with certain conditions which they feel are obligatory but on which small suppliers might take a different perspective. This applies already in areas such as modern slavery requirements, but it is now being applied by those who have signed up to the UN sustainable development goals. We are half way to the 2030 deadline for hitting these goals but on track to meet only 12% of the targets, so panic might be setting in.

The 17 UN goals are a worldwide initiative of generally apple-pie good things such as ending poverty, protecting the planet and, to use their words, ensuring that all people enjoy “peace and prosperity”—I am not quite sure that every SME can achieve that, but those are the aims of the UN Global Compact. The problem is that CEOs of large companies have clearly been persuaded to sign up—maybe over a long lunch at Davos or by their PR agents—and are now forcing their SME suppliers not just to comply with these goals but to evidence that they are doing so. They are forcing them to attend webinars, go to seminars and set out specific goals that they then have to explain to their customers that they have achieved.

I have talked to SME businesses that regard this as wholly inappropriate and are struggling to be able to do business with larger companies that force them to undertake this sort of work. They just do not have the resources, but they are frightened to speak up because they do not want to lose the business. They are responsible people who carry out their business in their own way and take care to undertake business responsibly, so why should they have to go through all these hurdles just to supply a product or service to a larger company? Artificial barriers are thus eventually being created and are detrimental to SME businesses.

I am sure the Minister is aware that large companies are forcing their suppliers to comply with these UN Global Compact requirements; people are being forced into training and taking on other costs that are unnecessary. Will he consider requiring such companies to disclose where they are forcing their suppliers to enter into these compacts? I accept that we do not want to make large companies do more work in their annual reports—the average FTSE 100 company annual report already has 97,000 words—but, none the less, a line has to be drawn against this behaviour.

In closing, I particularly thank the Institute of Chartered Accountants in England and Wales, of which I am a member, as well as Make UK and the British Chambers of Commerce, for their assistance to me to date. I very much look forward to working with the Minister, who I am sure will bring his extensive business expertise to this debate.