There was good news for the freelancers that make up a huge proportion of our sector yesterday (Tuesday 19 May) as ministers introduced “landmark legislation” to end late payments and back millions of sole traders, freelancers, and SMEs across the country.
The Small Business Protections Bill (formally known as the Commercial Payments Bill) promises to deliver “the toughest crackdown on late payments in a generation” – putting a clear duty on large firms to pay smaller suppliers on time and giving small businesses the certainty they need to keep investing, supporting jobs and growing their communities.
Late payments close 38 businesses every single day because they are not paid on time. That’s the equivalent of 266 a week, and well over a thousand in any given month. For business owners, the impact is immediate and personal – forcing them to spend hours chasing invoices instead of running their businesses, and putting jobs and livelihoods at risk.
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The bill fundamentally changes how businesses pay each other, putting an end to excessive delays and unfair practices that hit small firms hardest, through sweeping new reforms.
PM Keir Starmer said: “Small businesses are the backbone of our economy – run by people who take risks, create jobs and keep communities going. This government is firmly on their side.
“Too many small business owners are spending hours chasing money they are owed and when payments don’t come through, the cost is personal. It’s about whether you can pay your staff, keep the lights on, or invest in your future.
“Today we’re changing that with the toughest action on late payments in a generation, so small businesses get paid on time and get the backing they need to grow, create jobs and serve their communities.
Reforms include a clear 60-day cap on payment terms on all large firms paying smaller suppliers, mandatory interest on late payments, set at 8% above the Bank of England base rate, and a ban on the practice of withholding retention payments under construction contracts.
On top of this, the Small Business Commissioner is getting major new powers to investigate poor payment practices, adjudicate disputes, and fine the worst offenders – with potential fines that could be worth tens of millions for persistently late payers.
The Office of the Small Business Commissioner has already recovered more money for small firms in the last year than in the previous four years combined.
By improving cashflow through supply chains, the bill supports productivity, growth and keeps our small businesses afloat, by giving them the certainty they need to invest and grow.
Business Secretary Peter Kyle added: “Costing the UK economy £11 billion every single year, late payments choke growth, cost jobs, and force too many good businesses to close. That ends today.
Through this landmark bill we are delivering the toughest payment reforms in over a generation, to give the UK the strongest legal framework in the G7, and back small businesses with the certainty they need to grow and thrive.”
The news was broadly welcomed, although not without caveats. Sam North, co-founder and CEO of scaleup community summit SCALE Expo noted that “we’ll continue supporting efforts that make it easier for ambitious businesses to grow and scale in the UK,” adding that “The mandatory interest on late payments, set at 8% above the Bank of England base rate, is a much-needed deterrent.”
Ian Carson, however, head of dispute resolution at national law firm Harper James, which has offices in Manchester and Sheffield, cautioned that freelancers and small businesses shouldn’t treat the bill as a cure-all for the ever-present problem of late payments: “Businesses should not see the bill as a complete answer to every payment issue,” he warned. “It will not prevent genuine disputes about whether goods or services have been delivered properly, whether contractual milestones have been met, or whether an invoice is valid under the contract. Nor is it a substitute for having clear, well-drafted payment terms, dispute provisions and invoicing clauses in the first place. Those details will still make all the difference if problems arise.”
