Government takes steps to crack down on late payments

Ahead of the Government’s Spring Statement, Chairman of the Federation of Small Businesses (FSB) Mike Cherry revealed, “our late payment crisis causes the closure of an estimated 50,000 businesses a year, costing the economy £2.5 billion annually.”

He also added, “The spring statement is the chancellor’s opportunity to take a stand against the corporate late payers, who are withholding £18 billion from small firms across the UK.”

Last month, the Spring Statement brought good news for UK businesses, as Chancellor Philip Hammond, announced that a consultation would be launched; to identify how the unfair practices of late payment can be tackled. The initiative will aim to bring a crackdown on late payment practices, which negatively impact small businesses, following the collapse of construction giant Carillion.

It is unknown what further measures the government will take in supporting small UK businesses, in addition to recent measures the government has taken help tackle late payment, including the creation of the new role of Small Business Commissioner and also amending the Late Payment of Commercial Debts Regulations.

Small Business Commissioner:

Recently appointed Paul Uppal, has the new role of Small Business Commissioner, which was created by the Enterprise Act 2016, to help businesses tackle late payment within the private sector. The government’s description of the Commissioner’s role is that they will tackle the “scourge of late payment” and also “improve the business environment for the 5.5m small and medium businesses in the UK.”


The Late Payment of Commercial Debts Regulations:

The new amendments to the Late Payment of Commercial Debts Regulations, which came into force on 26 February 2018, aim to broaden the power and responsibility of business representative bodies, so that they can challenge unfair payment terms and practices on behalf of businesses. The Regulations enable creditors to challenge unfair practices such as:

  • Payment dates or periods
  • Claiming late payment interest
  • Late payment compensation


The amendments only apply to contracts made on, or after, 26 February 2018, for the supply of goods or services.  

The Late Payment of Commercial Debt Regulations seek to tackle late payment in commercial transaction deals by imposing an interest rate of 8% above base rate per annum, on overdue payments that relate to goods and services. The Regulations also expand the ability of representative bodies to challenge contract terms on behalf of any sized business, with the intention of seeking to address the power imbalance between SMEs and larger companies.

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