King’s Speech: Small businesses welcome late payment announcement

Small businesses have welcomed new legislation aimed at curbing late payments, calling it a historic moment. The King’s Speech introduced measures that empower the Small Business Commissioner to investigate and fine firms that consistently delay payments. The Late Payments Bill enforces a maximum payment term of 60 days and mandates interest for late payments at 8% above the Bank of England’s base rate.

Responding to today’s King’s Speech, Tina McKenzie, Policy Chair of the Federation of Small Businesses (FSB), said “The formal commitment to legislation to stamp out late payments is an historic moment for small firms, who have spent years battling a culture of poor payment practices by big businesses towards their smaller suppliers. FSB worked closely with the Government to help shape these law changes and we’re grateful ministers have listened to the voice of small businesses.

“Late payment destroys thousands of viable small firms a year, damages growth, hits confidence, and keeps hardworking business owners up at night wondering how they will cover wages, bills, and tax payments. For too long, large businesses have used small suppliers as a free overdraft. That’s why FSB has fought hard for these changes and worked in partnership with the Government to make them happen.

“Among the other measures, regulating unscrupulous third-party intermediaries, such as energy brokers and consultants, ending hidden commissions and cowboy sales tactics, is a much-needed move, and we hope the plans set out today will mean small firms finally get a fair deal and transparent energy prices.

“Proposals to raise visitor levies in England come at a time when the tourism and hospitality sectors are on their knees. If the legislation goes ahead, it must be designed with small firms in mind and avoid being a deterrent to tourism itself.”

Liz Barclay, IoD Special Advisor and former Small Business Commissioner, said “After many years of hard work and several consultations on how to deal with overdue payment of invoices and long payment terms in business contractions, we welcome new legislation on this crucial issue. However, this is where the hard work begins. We must reduce the impact on the economy and, more importantly, on small and micro businesses, 38 of which go to the wall every year because of late payments. We look forward to working with the Government as the Bill progresses.

“We also welcome the nod in the speech to make good the Government’s promise to cut the admin burden for small businesses. However, there’s much more that has to be done to allow innovative small and micro businesses to flourish and grow the economy.”

Sonia Jordan, President of R3 and Partner at Knights, said “Late payment continues to be a significant and long-standing challenge facing UK businesses, particularly SMEs. When payments are delayed, it disrupts cash flow, limits a company’s ability to invest and grow and in more serious cases can push otherwise viable businesses into financial distress.

“Our latest Business Health Report highlights that over 1.5 million businesses were affected by late payments in the first quarter of 2026, adding to the financial pressures many firms are already facing in a challenging economic environment.

“We therefore welcome the Government’s intention to bring forward legislation to tackle poor payment practices. Measures which encourage prompt, fair payment and strengthen accountability have the potential to make a meaningful difference to business confidence and resilience.

“Improving payment culture across the supply chain is key to reducing financial distress and helping businesses remain sustainable in the long term. Businesses should prioritise credit control and seek professional advice early if they are struggling, before late payments and arrears become unmanageable.”

ICAEW Chief Executive Alan Vallance said “Late payments are damaging to the economy, threatening jobs and the survival of otherwise productive businesses. Time spent chasing payments is time that is not being used by businesses to win new work and grow, and this legislation will make a real difference to payment culture.” “The government faces tough choices as it reels from last week’s local election results amid global uncertainty caused by the Iran war. Even with this planned legislation, top of the list must be prioritising measures to enable the economic growth the country needs. Earlier this month, the ICAEW members we asked said the government should prioritise tax simplification, provide regulatory clarity on AI and update the skills framework.

“Our members tell us that doing business is too complicated, too expensive, and too uncertain. We hope the government will commit to reducing the burdens on business to drive economic growth and boost confidence.”

Separately, the Finance & Leasing Association (FLA) has welcomed the Enhancing Financial Services Bill, which represents an important step in the Government’s pledge to update and strengthen the UK’s financial regulatory framework.

The Bill provides the legal basis for the timely changes announced to the Financial Ombudsman Service (FOS) to align FOS decisions with the Financial Conduct Authority (FCA) rules and guidance.

Over the past eighteen months, the FLA has worked collaboratively with HM Treasury and the FCA on plans to modernise financial services regulation, and we are pleased to see constructive progress.

FLA members provided £163 billion of new lending across businesses and households in 2025, of which over £122 billion supported essential household purchases, including cars. This was a record‑breaking annual total, delivered despite economic uncertainty.

Responding to the’ King’s Speech, Shanika Amarasekara, Chief Executive of the FLA, said “Today’s legislative programme reflects the importance of growth, investment and modernisation at a time when businesses and consumers are navigating significant economic and technological change.

“Measures focused on regulatory reform, innovation, access to finance and investment confidence are particularly important for sectors that support day-to-day economic activity across the UK.

“FLA members play a central role in financing the real economy, supporting businesses to invest in equipment, technology and vehicles, while helping consumers access mobility and everyday financial products.

“One of the FLA’s strengths is the practical perspective our members bring on how regulation and policy land in the real economy, particularly for businesses and consumers making day-to-day investment decisions.

“As policymakers consider how regulation evolves in the years ahead, it will be important to ensure that frameworks remain proportionate, predictable and capable of supporting both innovation and consumer confidence.

“The FLA welcomes the emphasis on growth and modernisation reflected in today’s Speech and looks forward to engaging constructively with government, regulators and industry on the practical implementation of these reforms . Across asset finance, consumer finance and motor finance, there is a significant opportunity to support investment, productivity and economic participation across the UK economy.”