King’s Speech Signals Crackdown on Late Payments
The UK Government has confirmed plans to introduce new legislation aimed at tackling late payments to small businesses, following commitments outlined in the 2026 King’s Speech.
During the speech, delivered on 13 May, the King said:
“My Government will also support the economic security of British businesses. Legislation will be introduced to tackle late payments [Small Business Protections (Late Payments) Bill] and to reduce the burden of unnecessary regulation through innovation [Regulating for Growth Bill].”
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.
The Bill will also expand the powers of the Small Business Commissioner, enabling the office to investigate businesses suspected of poor payment practices, adjudicate disputes outside the court process, and issue financial penalties to persistent late payers.
The announcement was welcomed by small business groups and industry representatives, who described the move as a landmark moment for SMEs struggling with poor payment practices.
Responding to the King’s Speech, Tina McKenzie, Policy Chair of the Federation of Small Businesses (FSB), said:
“The formal commitment to legislation to stamp out late payments is an historic moment for small firms, who have spent years battling a culture of poor payment practices by big businesses towards their smaller suppliers. FSB worked closely with the Government to help shape these law changes and we’re grateful ministers have listened to the voice of small businesses.
“Late payment destroys thousands of viable small firms a year, damages growth, hits confidence, and keeps hardworking business owners up at night wondering how they will cover wages, bills, and tax payments. For too long, large businesses have used small suppliers as a free overdraft. That’s why FSB has fought hard for these changes and worked in partnership with the Government to make them happen.”
McKenzie also welcomed proposals to regulate third-party intermediaries, including energy brokers and consultants, while warning that proposed visitor levy changes could negatively affect tourism and hospitality businesses.
The measures were formally introduced to Parliament on 19 May through the Small Business Protections Bill.
Emma Jones, the UK’s Small Business Commissioner, said:
“Today in the King’s Speech it was confirmed that the Government will be introducing a Bill to tackle late and unfair payments. This is excellent news for UK businesses. Currently late payments cost the UK economy £11 billion a year with founders spending over 86 hours chasing overdue invoices. I am committed to get money moving in the economy and free up small businesses time to grow and thrive. Ending late payments will be critical to realising this goal.”
The Government said late payments currently force 38 businesses to close every day across the UK.
Announcing the Bill’s introduction, Keir Starmer said:
“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.”
Small Business Protections Bill announcement
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