Ministers have shifted from nudges to rules. In a letter dated 24 March 2026, Small Business Minister Blair McDougall tells UK CEOs and CFOs to prepare for a clampdown on late payment. He cites the drag on growth plainly: an £11 billion annual cost, around 38 business closures a day, and 133 million hours lost to chasing overdue invoices, according to the Department for Business and Trade. (assets.publishing.service.gov.uk)

The plan sets out a 60‑day hard cap on business‑to‑business payment terms with tightly defined exemptions; makes interest on all late invoices mandatory at eight percentage points above the Bank of England base rate; introduces limits on how long buyers have to raise invoice disputes; and strengthens the Small Business Commissioner’s hand to investigate, adjudicate out of court and levy significant financial penalties on persistent late payers. Boards or audit committees at large firms with poor records will have to explain why and how they will fix it. (assets.publishing.service.gov.uk)

One of the most contested areas is construction. McDougall says government intends to prohibit the deduction of retentions in construction contracts and will consult on how to implement it-moving beyond mere disclosure towards removing the practice entirely. Prior consultation materials flagged this option to address cash being trapped upstream and lost in insolvencies. (assets.publishing.service.gov.uk)

Today’s letter lands alongside the government’s consultation response. Earlier consultation texts pointed to a 30‑day invoice verification window to prevent tactical disputes and, at one stage, signalled a potential glidepath from 60 to 45 days; ministers now add that any move below 60 days would be subject to further consultation. For finance teams, the immediate working assumption should be a 60‑day legal ceiling. (gov.uk)

Reporting keeps tightening. Large companies must continue to publish twice‑yearly statistics on GOV.UK under the Reporting on Payment Practices and Performance Regulations 2017, and for financial years beginning on or after 1 January 2026 must also include supplier payment data in the directors’ report-backed by updated guidance from the Financial Reporting Council. Expect auditors and investors to read these disclosures closely. (gov.uk)

McDougall’s ask of corporates is immediate: set supplier terms at a maximum of 60 days unless a stated exemption applies; pay every supplier on time; configure systems to calculate and pay statutory interest on late invoices; keep the twice‑yearly GOV.UK reports up to date; and ensure the directors’ report includes the new payment statements. Businesses already paying promptly should see limited extra burden. (assets.publishing.service.gov.uk)

How costly is lateness likely to be? Under existing rules, the statutory interest formula is base rate plus 8 percentage points. With Bank Rate at 3.75% following March’s hold, that implies 11.75%. On a £100,000 invoice paid 15 days late beyond agreed terms, that’s roughly £480 in interest-small per invoice, material at scale once applied automatically. (gov.uk)

Working capital moves faster than strategy. Consider a Midlands supplier invoicing £330,000 a month with customers currently paying in around 70 days. Pulling terms to 60 days releases roughly a third of a month of receivables-about £110,000-enough to trim overdraft utilisation, buy stock earlier, or absorb a pay award without a liquidity crunch. That is the quiet productivity gain policymakers are chasing.

Construction leaders should plan for a post‑retention world. The consultation trail contemplated either banning retentions outright or ring‑fencing funds; ministers now favour prohibition and will consult on implementation. In practice, that could shift risk management towards performance bonds, insurance or tighter milestone payments rather than withholding cash from the supply chain. (gov.uk)

There is also a carrot. The Small Business Commissioner’s Fair Payment Code now counts more than 550 awardees, according to the minister, including household names such as BT, Aviva, AstraZeneca, BAE Systems, Heathrow, Lloyds, HSBC and NatWest. The Code’s tiers are clear: Gold for paying at least 95% of all invoices within 30 days; Silver for 95% within 60 days with small firms on 30; Bronze for 95% within 60. (assets.publishing.service.gov.uk)

For large caps, the governance risk is rising. With payment metrics moving into the directors’ report and enhanced enforcement powers for the Small Business Commissioner, poor performers will be more visible to shareholders, lenders and the press. Audit committees should expect to review KPIs, remediation timelines and systems readiness as boards may need to publish commentary where performance lags. (media.frc.org.uk)

There is no statutory commencement date yet, but the direction is unambiguous: late payment is shifting from habit to compliance risk. For CFOs, the priority list is contract clean‑up, AP system configuration for interest, and board‑level visibility of payment KPIs. When interest becomes mandatory and the watchdog can fine, every extra day past due will cost the payer-not the supplier. (assets.publishing.service.gov.uk)