The UK government is launching a major crackdown on late payments to protect small businesses from financial strain. Prime Minister Keir Starmer has warned firms that persistently delay payments, saying it’s “time to pay up.” Meanwhile, Business Secretary Jonathan Reynolds will announce strict new measures, including fines and penalties for repeat offenders.
On Thursday, Reynolds will reveal the crackdown on late payments, which aims to reduce the £11bn annual cost to the economy. Currently, around 38 businesses close daily due to late payments, harming freelancers, shop owners, and family-run firms. The reforms will empower the Small Business Commissioner to impose hefty fines and conduct spot checks. Additionally, the watchdog will resolve payment disputes faster by setting strict deadlines.
As part of a broader support package, Labour will also offer £4bn in startup loans for 69,000 new businesses. Reynolds says this will “inspire the next generation of entrepreneurs.” Prime Minister Starmer and Chancellor Rachel Reeves strongly back the plan, especially after two months of economic decline. Recent ONS data shows a 0.1% contraction in May following a 0.3% drop in April.
Starmer emphasized that SMEs employ 60% of the workforce and generate £2.8tn in revenue. “Builders, designers, and manufacturers waste hours chasing payments instead of growing their businesses,” he said. “This unfair practice must end.” Reynolds will introduce a 60-day maximum payment term, later reducing it to 45 days, ensuring faster compensation for suppliers.
The crackdown on late payments will force large companies to disclose payment practices. Audit committees must now review payment timelines at the board level. Mandatory interest charges will apply to late payers, increasing accountability. Small Business Minister Gareth Thomas stated, “Cash flow problems hinder growth—our plan tackles these issues head-on.”
With these measures, Labour aims to create a fairer business environment while stimulating economic recovery. The reforms mark a significant shift in how late payments are handled, offering long-awaited relief to small enterprises.
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