The government has put late payments back on the small business agenda, with the King’s Speech confirming plans for a Small Business Protections (Late Payments) Bill. For many UK SMEs, that could matter more than another broad promise to cut red tape: it goes directly to whether firms can get paid quickly enough to cover wages, rent, suppliers and tax.
The announcement is not yet the final law. Details will still need to go through Parliament. But the direction of travel is clear enough for small firms to start watching what may change, especially if they regularly supply larger customers or spend too much time chasing overdue invoices.
What happened
In the King’s Speech on 13 May 2026, the government said legislation would be introduced to tackle late payments. The Small Business Commissioner welcomed the move, saying late payments currently cost the UK economy £11 billion a year and that founders spend more than 86 hours chasing overdue invoices.
The Commissioner also pointed to measures the government has already been considering after its consultation response. These include stronger powers for the Small Business Commissioner, a proposed maximum payment term of 60 days with limited exemptions, mandatory late-payment interest at 8% above the Bank of England base rate, a time limit for raising disputes, and more accountability for persistently late-paying large companies.
Those ideas are important because late payment is rarely just an admin nuisance. For small suppliers, a delayed invoice can mean borrowing to fund work that has already been delivered, putting off investment, delaying hiring, or spending evenings chasing cash instead of serving customers.
Why this matters for SMEs
Cash flow is often the difference between a healthy order book and a stressed business. A small firm can be profitable on paper and still struggle if money arrives weeks or months late. That pressure becomes worse when costs are rising, finance is expensive, or a business depends on a small number of larger customers.
That is why the proposed focus on payment terms, dispute deadlines and enforcement powers could be significant. If large buyers face clearer rules and stronger consequences, smaller suppliers may have a better chance of getting paid on agreed terms. It could also make it harder for slow payment to be treated as a normal way of managing working capital at someone else’s expense.
BritishSME has previously covered how late payments are still squeezing UK SMEs. The new King’s Speech announcement makes that issue more immediate because it suggests the policy may now move from consultation into legislation.
What small firms should watch now
First, watch the Bill itself. The headline promise matters, but the practical effect will depend on definitions, exemptions, enforcement powers and timing. SMEs should look for whether the final proposals cover their typical customers, whether payment-term limits are firm enough to change behaviour, and how easy it will be to raise a complaint or dispute.
Second, review your own payment terms before any new law arrives. Clear terms, accurate invoices, correct purchase order references and prompt follow-up all reduce the chance of avoidable delay. They also put a supplier in a stronger position if a customer tries to argue that an invoice is incomplete or disputed late in the process.
Third, track repeat offenders. A simple record of invoice dates, due dates, chase dates, excuses and actual payment dates can show whether a problem is occasional or systematic. If stronger reporting or enforcement routes are introduced, that evidence may become useful.
Fourth, check whether your contracts give customers too much room to delay. Some small firms accept long payment terms to win work, only to discover that the margin does not justify the cash-flow risk. Where possible, negotiate staged payments, deposits, shorter terms, or clearer acceptance processes for completed work.
Finally, do not wait until an overdue invoice becomes a crisis. If one large payment would decide whether you can meet payroll or pay suppliers, that customer concentration is a risk in itself. A cash-flow forecast should include realistic payment timings, not just sales values.
The practical takeaway
The late payments Bill will not solve every cash-flow problem overnight. It still has to be drafted, debated and implemented, and small firms will need to see how strong the final rules are. But the signal from the King’s Speech is important: late payment is being treated as a business conduct issue, not just a private disagreement between buyer and supplier.
For SME owners, the best move now is to tighten the basics. Keep invoices clean, document payment behaviour, understand which customers create the most risk, and follow the Bill as it develops. If the rules become tougher, firms that already have good records and clear terms will be better placed to use them.
Sources
- Small Business Commissioner, Small Business Commissioner welcomes late payment announcement in the King’s speech, published 13 May 2026
- GOV.UK, The King’s Speech 2026, published 13 May 2026
