Late Payments Consultation

To support this, the Department for Business and Trade have launched a 12-week consultation seeking views on proposed legislative measures to ensure companies pay their suppliers quickly and on time. The consultation will close on 24 October 2025.

Late Payments research has also been published.

The proposed measures within the public consultation are:

• To increase discussion and scrutiny of large companies’ payment practices at board level, including by exploring potential roles for audit committees or company boards.
• Setting maximum payment terms to 60 days, removing the exemption that allows businesses to agree terms longer than 60 days.
• Introducing a 30-day invoice verification period, so that businesses who wish to raise a dispute will need to do so within 30 days.
• Providing the Small Business Commissioner with additional powers and responsibilities to investigate businesses, impose fines and make legally binding arbitration in their function in helping resolve payment disputes.
• Giving the Small Business Commissioner responsibility for spot-checks to ensure accurate payment performance reporting by large businesses.
• Fining large businesses that consistently pay their suppliers late.
• Making interest for late payments mandatory, removing the option for businesses to negotiate lower compensation rates.
• Introducing a new requirement for businesses to report how much statutory interest on late payments they pay their suppliers.
• Following consultation, introducing one of two options related to the use of retention clauses in construction contracts: either prohibiting the use of retention clauses in construction contracts; or the introduction of requirements to protect retention funds deducted and withheld from insolvency and late or non-payment.

This is an important consultation for the construction industry and presents a real opportunity to address the long-standing issues associated with the use of retention clauses in construction contracts. On behalf of the CLC, Mark Reynolds wrote to Minister Sarah Jones MP in summer 2024 calling for action and her commitment as part of the proposed public consultation to consider measures to address the abuse of retentions. The consultation does not ask whether retentions are an issue (that is a given) but asks for feedback on 2 options – a ban on the contractual mechanism or protection of retained funds.