Time’s up on late payments: How large companies are harming UK’s smaller businesses

Mace | 24th May 2026 | Comment, Policy & Think Tanks, Politics
Graham Donnelley, CEO

Graeme Donnelly, CEO and founder of 1st Formations, explains why the King’s Speech’s proposed crackdown on late payments will help the SME economy.

The King’s Speech sets out a wide-ranging legislative programme covering more than 30 bills across key areas of the economy. For SMEs, the challenge is that while the agenda is ambitious, it does not directly address the day-to-day cost pressures that continue to dominate operating conditions.

The most immediate positive is the crackdown on late payments.

This long-standing issue in UK supply chains sees smaller firms effectively financing larger ones through delayed payment of invoices. For many SMEs, late payments are not simply an administrative frustration. They are a direct threat to cash flow, business stability and growth potential.

When payments are delayed, smaller businesses often face difficult choices. Hiring plans are paused, investment decisions are delayed and working capital comes under pressure. In some cases, persistent late payments can increase insolvency risk and lead to redundancies, particularly in sectors already operating with tight margins.

The proposed measures, including maximum payment terms, mandatory interest on overdue invoices and stronger enforcement powers for the Small Business Commissioner, could materially improve cash flow for SMEs if properly enforced.

That point is critical.

Much of the impact is dependent on how effectively measures are implemented in practice, rather than what has been announced. Delivery will be the defining factor, …

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