Britain's small businesses stand on the brink of long-overdue protection. Next Tuesday, 21 July, peers in the House of Lords will begin line-by-line scrutiny of the Commercial Payments Bill, a measure that seeks to cauterise one of the most persistent wounds afflicting the nation's entrepreneurial arteries.
The legislation already cleared its introduction on 19 May and second reading on 9 June. Now comes the forensic stage where exemptions are tested, ambiguities probed and the balance between discipline and flexibility weighed. Its core provisions strike at practices that have become normalised yet corrosive.
A statutory straitjacket on payment terms
The bill imposes a maximum 60-day payment term on commercial contracts, with strictly limited exemptions. For public authorities the cap tightens further to 30 days. Late payments will attract mandatory interest at 8 per cent above the Bank of England base rate. In construction, the habitual withholding of retention sums stands prohibited. Suppliers gain the right to a fixed sum when disputes are raised late or without proper information.
These are not abstract tweaks. They address a haemorrhage estimated to cost the UK economy £11 billion annually and drive roughly 14,000 business closures every year. Forty-four per cent of invoices issued by small and medium-sized enterprises are paid late. The construction sector, where retention practices have long been entrenched, suffers with particular severity.
The bill expands the Small Business Commissioner's armoury. Investigators will gain powers to examine persistent poor payers, adjudicate contractual disputes, issue recommendations, issue directions and impose financial penalties. Large firms face new reporting obligations on their payment practices, interest accrued and actions taken against underperformers. The regime is not retrospective and includes a transition period before full effect in 2027.
Supply-chain resilience over regulatory reflex
Seen clearly, this is no extension of state micromanagement but a recalibration of commercial conduct in favour of the productive base. Small enterprises, often family-run, lack the cash-flow buffers of corporate giants. When invoices linger unpaid they curtail investment, delay hiring and, too often, fold. The bill therefore shores up the social market economy by reinforcing the freedom to trade on fair terms rather than subsidising the powerful at the expense of the vulnerable.
