UK late payments bill raises pressure on large firms over SME cashflow

The UK government has put late payments back at the centre of its small business agenda, with new legislation expected to increase penalties for companies that fail to pay suppliers on time.

The Small Business Protections Bill, included in the King’s Speech on 13 May, is designed to strengthen protections for SMEs and increase the cost of poor payment behaviour.

The proposed measures come after years of pressure from small businesses, lenders and industry groups warning that late payments remain one of the most persistent barriers to growth.

For receivables finance and working capital providers, the bill is directly relevant. Slow payment by larger buyers increases demand for invoice finance, short-term credit and collections support. It also raises risk for smaller suppliers that rely on predictable cashflow to fund wages, stock and production.

The legislation is expected to increase penalty interest for late payment, giving suppliers a stronger legal position when larger customers delay settlement.

That will not remove the need for finance. Many SMEs still avoid challenging major customers because they fear losing future business. But stronger rules could improve payment discipline and make receivables easier to finance.

The development also gives lenders and fintech providers a clearer policy backdrop for invoice automation, collections tools and receivables finance products.

Late payment has long been treated as a conduct issue. The new bill recognises it as a working capital problem.