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The Department for Business & Trade is planning legislation to give stronger powers to the Small Business Commissioner to impose fines on firms who persistently pay their suppliers late.

The Small Business Commissioner will be given new powers to carry out spot checks and enforce a 30-day invoice verification period to speed up resolutions to disputes. The legislation will also introduce maximum payment terms of 60 days, reducing to 45 days.

Audit committees will be legally required to scrutinise payment practices at board level, placing greater pressure on large firms to show that they are treating small suppliers fairly, backed by mandatory interest charges for those who pay late.

According to the government, late payments costs the UK economy £11bn per year and cause an average of 38 UK businesses to close every day.

Prime minister Keir Starmer said: “From builders and electricians to freelance designers and manufacturers, too many hardworking people are being forced to spend precious hours chasing payments instead of doing what they do best – growing their businesses. It’s unfair, it’s exhausting and it’s holding Britain back. So our message is clear: it’s time to pay up.”

Small business minister Gareth Thomas added: “I want the UK to be the best place in the world to start a business, grow and succeed – and that’s why we’ve taken bold steps today. Too many small firms go under each year because they aren’t paid on time – that is completely unacceptable.”

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