The government has announced business reforms which are claimed to represent the toughest crackdown on late payments for 25 years. The new measures are designed to provide protection for small businesses and include new powers for the Small Business Commissioner, heavy fines for big businesses and persistent offenders and a ban on the withholding of retention payments under construction contracts.
Changes will include a new 60-day cap on payment terms on all large firms when paying smaller suppliers. New mandatory interest on late payments will also be introduced, with a requirement for all commercial contracts to include statutory interest set at 8% above the Bank of England base rate.
“Far too many businesses are forced to shut down because they have not been paid – that is simply unacceptable,” says Business Secretary, Peter Kyle. “We are unveiling the strongest, most robust changes to payment laws in over a generation – laws that will transform the fortunes of small businesses for years to come and make their day to day lives much easier.”
The Building Engineering Services Association (BESA) has welcomed the government’s announcement, describing it as a landmark and long-awaited victory for specialist contractors across the UK. The Assocation has been lobbying for reform on retentions and late payment practices for many years and has played an active role in shaping the consultation.
David Frise, chief executive of BESA, comments: “The government has listened to the concerns of our members and the wider industry. This decision has the potential to transform cashflow, improve business resilience, and create a fairer, more sustainable supply chain. It is particularly encouraging that policymakers engaged directly with our members during the consultation process. That real-world insight has clearly helped shape a more robust and meaningful response.”
The issue of retentions has long been a major concern for SMEs in construction, with many businesses suffering from withheld payments, delayed release of funds, and in some cases losing retention money entirely due to upstream insolvencies.
The government has indicated that further consultation will take place on how the ban will be implemented, including transition periods and ensuring a clear and robust definition of retentions to prevent their reintroduction in other forms. Legislation is expected to follow when parliamentary time allows, although implementation is likely to take up to two years.
BESA is encouraging its members and the wider industry to continue engaging with the process to ensure the final framework delivers meaningful and lasting change.
