Small businesses across the UK are set to benefit from what the government is calling “the most comprehensive support package in a generation,” as ministers unveil sweeping reforms to tackle late payments and rebalance the financial odds for SMEs.

Launched as part of the government’s broader “Plan for Change” agenda, the initiative promises to overhaul how big firms treat their smaller suppliers, with a clear warning: persistent late payers could now face millions in fines.

“Too many small businesses work hard but don’t get the backing they deserve,” a government spokesperson said. “They’ve been held back by late payments and a system that hasn’t worked in their favour.”

The package, hailed as a landmark shift in small business policy, will grant new enforcement powers to the Small Business Commissioner, including the ability to carry out spot checks and issue financial penalties to large firms that consistently delay payments.

Among the most significant reforms are:

• Mandatory maximum payment terms of 60 days, reducing to 45;
• A 30-day invoice verification limit to speed up dispute resolutions;
• Board-level accountability through mandatory audit committee oversight;
• Mandatory interest on overdue payments.

The measures aim to directly address the staggering £11bn annual cost of late payments to the UK economy, responsible for the closure of 38 small businesses every day.

At the heart of the plan is a toughened legal framework designed to position the UK as the strictest G7 nation on late payment enforcement. While countries like the US, Canada, and Germany have voluntary codes or guidelines for payment terms, the UK is proposing legally binding maximum payment terms, starting at 60 days and reducing to 45 days — outstripping the statutory payment periods or enforcement mechanisms in many of its G7 peers.

Sector voices

Industry leaders have cautiously welcomed the plan, stressing the urgency of translating promises into real-world enforcement.

Jonathan Andrew, CEO of Bibby Financial Services, struck a similar tone, noting that past efforts have fallen short. “Fifty-eight percent of SMEs believe previous measures didn’t go far enough,” he said. “This latest announcement is only the first step. SMEs need to see these plans convert into tangible action.”

He also flagged wider issues compounding the late payment crisis, such as customer insolvency and bad debt: “Late payments are not an isolated issue.”

John Phillipou, Managing Director of SME Lending at Paragon Bank, called the reforms “a welcome step forward” and said the emphasis on board-level transparency would be “vital.”

“We particularly welcome the requirement for large companies to report payment practices in their Directors’ Reports,” he said. “This will shine a light on poor performers and empower suppliers to make informed decisions.”

The government insists the reforms build on a “solid foundation of certainty and stability,” citing recent interest rate cuts, trade deals and a long-term industrial strategy as signs of sustained pro-business momentum.

But as Phillipou noted, the impact will only be real if SMEs “are paid promptly and have access to fair finance.” Until then, the country’s £2.8 trillion SME sector—responsible for 60% of UK employment—will continue to watch closely for action, not just words.