A Bill before Parliament would change how long large firms can keep their smaller suppliers waiting for money. This article sets out what the Commercial Payments Bill proposes, what the government has said about timing, and why it matters to London businesses that sell on credit.
What is the Commercial Payments Bill?
The legislation, introduced in Parliament on 19 May 2026, is formally the Commercial Payments Bill and was presented by ministers under the banner of the Small Business Protections Bill. According to GOV.UK, it is the most significant legislation on late payment in more than 25 years, building on the Late Payment of Commercial Debt Act of 1998.
The government’s case rests on the scale of the problem. According to its published figures, late payment costs the UK economy about £11 billion a year and contributes to 38 business closures every day. That daily figure is equivalent to 266 a week, or roughly 14,000 a year in the government’s consultation response.
Why is late payment such a large problem?
The consultation response gives a detailed picture of who is affected and how. As reported there:
- Over 1.5 million businesses, or 28% of the total, are affected by late payment each year.
- An estimated £26 billion is owed at any one time, averaging £17,000 for each affected business.
- Affected businesses spend about 86 hours a year chasing payment, which the government puts at 133 million hours across the economy.
- Some 15% of surveyed businesses said they avoid certain customers because of how they pay.
The last point is a reminder that late payment is not only a cash problem. It shapes whom a supplier is willing to work for, and it can quietly narrow a firm’s growth options. For the wider cash-flow mechanics, see what business owners should understand about cash flow.
What would the Bill change?
The measures described by the government fit into a few groups.
| Measure | What is proposed |
|---|---|
| Payment terms | A 60-day maximum for large firms paying smaller suppliers, with strictly limited exemptions |
| Interest | Mandatory interest on late payments at 8% above the Bank of England base rate |
| Disputes | A fixed sum payable to the supplier where a buyer raises a dispute late or without enough information |
| Construction | A ban on deducting or withholding retention payments |
| Enforcement | New Small Business Commissioner powers to investigate, adjudicate and fine |
| Transparency | Boards or audit committees of persistently late payers must publish an explanation and remedial plan |
How does the 60-day cap differ from today’s rules?
Under current guidance on GOV.UK, a payment with no agreed date is late 30 days after the invoice is received or the goods or services are delivered, whichever is later. Where a date is agreed, it must usually fall within 30 days for public authorities or 60 days for business transactions. Longer business terms are allowed only if they are fair to both sides.
That fairness test is the gap the Bill targets. According to the government’s consultation response, the cap would remove the current option of agreeing longer terms unless they are “grossly unfair”. In practice, that means a supplier would no longer have to argue that a 90- or 120-day term was unreasonable after the event. The ceiling would simply apply.
Who would be exempt?
The government response lists three planned exemptions to the payment-term limit:
- Contracts where both parties are large companies.
- Contracts where the purchaser is the smaller party.
- Goods or services that are imported or exported.
The overview page describes the exemptions as “strictly limited” but does not list them, and the Bill’s definitions of “large” and “small” are not set out there either. Those details will decide how many London firms actually gain protection. A micro-agency invoicing a national retailer is clearly in scope on the government’s description; a mid-sized firm selling to a similar-sized customer is a harder case to call.
What would a late payment cost in practice?
Illustrative arithmetic helps show why the interest provision matters. The figures below are hypothetical and use an assumed base rate, not a forecast.
Suppose a supplier invoices £20,000 and the buyer pays 30 days beyond the permitted term. If the base rate were 4%, the statutory rate would be 12% (8% plus 4%). Interest for 30 days would be £20,000 × 12% × 30/365, which is about £197.
That is a modest sum on one invoice, and it shows the design logic. The charge is small enough to be routine but large enough, across hundreds of invoices, to give a big buyer a reason to pay on time. The government response also says that parties could no longer agree alternative remedies or different rates, which closes the common route of contracting out of interest altogether.
Will the Small Business Commissioner get real powers?
The Bill would give the Small Business Commissioner three main functions, according to the government overview:
- Investigate larger businesses suspected of persistent poor payment practices, make recommendations and take enforcement action, including directions and financial penalties.
- Adjudicate contractual payment disputes between small and larger businesses outside the courts, with binding interim decisions.
- Enforce breaches of large businesses’ payment-reporting duties.
The consultation response gives an example of how fines might work: twice the unpaid statutory interest. It also floats a trigger for flagging persistent late payers, using the example of reporting that 25% or more of suppliers are paid late. These are examples rather than settled rules. The government says the Commissioner’s office recovered more money for small firms in the last year than in the previous four years combined, which is the track record ministers cite for extending its role.
Large companies and LLPs already report half-yearly on payment practices. New secondary legislation would require them to report interest owed and interest paid as well.
When could any of this take effect?
Not yet. As of the government’s consultation response, the 60-day limit would start no earlier than 2027, and the government says a lead-in and transition period will come before the powers apply. The measures would not apply retrospectively, so existing contracts, payments and disputes would be judged under the rules in force at the time.
A 45-day limit was not taken forward in the government response, though it said it might revisit the idea later with further consultation. On construction, the ban on retentions is accompanied by a promise of further consultation on implementation, and respondents mainly supported a transition of 12 to 24 months.
The Bill began in the House of Lords, and its later stages and any amendments could still alter the detail. Businesses should treat the current proposals as a direction of travel rather than settled law.
What should London suppliers watch as the Bill moves?
London’s economy is dense with the kind of firms the Bill is aimed at: agencies, consultancies, contractors, caterers, makers and logistics operators that sell to large corporate customers on invoice. Several practical questions follow, reported here as areas to watch rather than advice:
- How “large” and “small” are finally defined, since that sets the Bill’s reach.
- Whether the exemption for imports and exports blunts the effect for firms in international supply chains.
- How quickly the Commissioner is funded and staffed. The response says the office would receive further grant funding and could recover investigation and adjudication costs.
- What the published board commentary reveals about which large payers are persistently late.
The financial backdrop matters too. Small firms already face rising costs, as covered in the financial pressures London’s small businesses are navigating, and slow-paying customers can turn a tight month into a borrowing decision. Lenders and guarantee schemes remain part of that picture, as growth guarantee scheme changes for London borrowers explains.
A shorter wait, if the Bill survives intact
The Commercial Payments Bill is an attempt to turn late payment from a negotiation into a rule: a fixed ceiling on terms, interest that cannot be waived away, and a regulator able to act. The unsettled parts are the exemptions, the definitions, the start date and the fine levels. Until those are fixed, suppliers have a clearer sense of where policy is heading than of exactly when, and for whom, the change will bite.
This article is general information, not legal, tax or financial advice. Proposals may change as the Bill progresses, so check current official guidance.
Sources: GOV.UK
