Late-paying companies to face penalties under new crackdown

The UK’s new Small Business Commissioner, Emma Jones CBE will be given new powers to penalise firms who pay suppliers late as part of the newly-unveiled Small Business Plan.

The Office of the Small Business Commissioner (OSBC) was originally set up in 2016 to tackle the issue of late and unfair payments for SMEs, and its impact on cash flow. Under the new plans, persistent offenders could face fines worth potentially millions of pounds.

The business secretary, Jonathan Reynolds, will formally announce the Plan this afternoon. As well as the new measures, the OSBC will also release research which shows business owners spend an average of 86 hours chasing debt each year.

Speaking exclusively to Startups, Jones commented: “Today is a day that celebrates the incredible role small businesses play in the economy. The Plan is a public commitment to continued work to ensure you have the conditions in place for business to flourish.”

Late payments closing 38 businesses a day

Slow payments from larger firms have been increasingly impacting SME cash flow, research shows. On average, small businesses are now reportedly owed £21,000 in unpaid invoices. 

The issue is driving many into debt. Last week, data showed that 32% of small companies have considered taking out a loan to make up for lost income. Government data estimates it shutters 38 businesses a day, and costs the economy roughly £11bn a year.

As well as the ability to fine bad actors, the Small Business Commissioner will also be able to force customers to pay their supplier within 30 days of receiving a valid invoice, unless otherwise agreed, with spot checks to help identify breaches. The Small Business Plan will also give billed firms a maximum of 60 days to settle up, reducing to 45 days in future.

In a statement, the Prime Minister said that “too many hardworking people are being forced to spend precious hours chasing payments” as part of an “exhausting” process.

“Through [the plan], we’re not only tackling the scourge of late payments once and for all, but we’re giving small business owners the backing and stability they need for their business to thrive, driving growth across the country through our plan for change,” he added.

Plans to boost SME funding

Alongside the late payment crackdown, the Small Business Plan is also hoping to bolster balance sheets by improving access to finance for new businesses.

In the 2025 Startups 100 Index, launched this January, our top 10 startups reported they had raised an average of £25m each. This suggests that businesses need significant financial backing of ten-figure funding rounds, at least, to thrive in the current economic climate.

At the same time, SMEs are finding it harder to raise, particularly through debt finance. In March, figures from UK Finance — the British trade association for banking and finance —  revealed a £7bn drop in net lending to SMEs last year.

Today, Reynolds has also announced £1bn in funding to deliver 69,000 government-backed StartUp Loans. Plus, a £3bn boost to the ENABLE programme, a funding scheme delivered by the British Business Bank that provides guarantees to those lending to SMEs.

Commenting on the news, Reynolds said the plan is aimed at “making it easier for businesses to set up shop and giving SMEs the financial backing they need.

“This is our Plan for Change in action, putting more money in people’s pockets, boosting local communities and ensuring Britain is a great place to do business and thrive.”