Late payments legislation set to offer world’s strongest protections for SMEs, finds new report

Small businesses across the UK are set to benefit from the strongest commercial late payments regulations of any major economy, according to a new report conducted by the Enterprise Research Centre.

The report found that new legislation to protect smaller firms from late payments and unfair practices when supplying to larger businesses goes further than comparable frameworks in other developed economies in the EU and G7.

Research, commissioned by the Department for Business and Trade, compared payment laws across 20 jurisdictions. It finds that the UK’s Commercial Payments Bill – combining a mandatory 60-day payment cap, non-waivable interest, and an empowered Small Business Commissioner – is more comprehensive than any existing international framework.

The research also identified two international models that have achieved sustained improvement: Japan, where proactive government enforcement cut late payment incidence from 25% to 12% over 18 years; and the Netherlands, which has the lowest rate of late payment difficulties in the EU – just 31% of companies affected – under a law that caps payment terms at 30 days when large companies pay small suppliers.

It also found that transparency and voluntary approaches, as were previously in place in the UK, alone consistently fail to secure prompt payments for small businesses. Instead, small businesses often suppress taking late payment claims to civil courts in order to protect commercial relationships.

The report concludes that only mandatory caps backed by proactive enforcement change behaviour at scale, supporting the UK’s chosen framework design.

Emma Jones, Small Business Commissioner, said:

“This research shows the UK is working to pass legislation that would herald the world’s fairest payment terms and times. This comes not a moment too soon as small businesses look to free up time and cash to go for growth. At our event we brought together international policymakers and stakeholders to update on UK progress and consider the potential for other countries to follow suit. Doing so could see a move to a single international SME payment standard that would make life easier for large corporates buying from SME suppliers and small firms themselves.”

Professor Mark Hart, Deputy Director, Enterprise Research Centre, Warwick Business School, said:

“In this comprehensive global audit, we conclude that the proposed UK legislative package for 2025–2026 is an “architecturally complete” framework that directly incorporates several international “gold standards” to address the structural power imbalances inherent in late payments. 

“Our work provides rigorous international evidence for the UK Government by identifying key benchmarks—from Japan’s proactive enforcement, the Netherlands precisely targeted two-tier legislative structure, to Ontario’s rapid adjudication—that are essential for ensuring the proposed legal framework will transform the UK’s payment landscape and underpin SME growth and productivity.”