Government’s Late Payment Crackdown Offers Lifeline to Small Businesses

The UK government’s new measures to tackle late payments have been welcomed by small and medium-sized enterprises as a long-awaited reform that could improve cash flow for businesses across the country.

Under the Small Business Plan, large companies will be required to pay small suppliers within sixty days, with a future goal of reducing this to forty-five days. Audit committees will need to review payment practices, and firms that consistently fail to pay on time may face fines. The Small Business Commissioner will also have enhanced powers to enforce compliance.

Business leaders have praised the initiative. The Federation of Small Businesses described the plan as encouraging, and other organisations across the UK noted that it addresses key challenges faced by smaller firms.

Why This Matters for SMEs

• Cash flow relief: Late payments are a chronic challenge for small firms, often limiting investment and growth. These reforms aim to reduce uncertainty and provide more predictable cash flow.

• A turning point: Analysts suggest the crackdown could reshape business culture and promote fairer practices across industries.

• Confidence in lending: Recent data show a rise in lending to SMEs. In the first quarter of 2025, gross lending by major banks to small businesses reached nearly £4.6 billion, a 14 percent increase compared to the same period last year, marking the highest level since the second quarter of 2022.

• Broad business support: The Small Business Plan has received backing from multiple business groups, who highlight the benefits of faster payments, improved access to finance, and reduced administrative burden.

Outlook and Challenges

While the reforms are promising, their effectiveness will depend on strong enforcement, awareness among both suppliers and large companies, and transparency in reporting. Some critics note that legislation alone is not enough, and that a shift in business culture around payment practices is also needed.

For many small businesses facing erratic payments, these measures offer a hopeful signal that the government is taking tangible steps to make operating conditions fairer and more sustainable.