New measures to crack down on late payments


Construction businesses will soon be made to report on retention payments as part of a crackdown on late payers in the industry.  

The measure, headed up by the Department for Business and Trade (DBT), is part of a wider review of cash flow and prompt payment, to address the problem of late payments to small businesses. 

Late payment of invoices and long payment terms can be a barrier to growth, especially for SMEs, as time is wasted chasing payment from customers while cash flow problems build up and impact a company’s viability. 

Struggling smaller construction firms in the supply chain continue to be overrepresented in the latest industry insolvency figures. Of the 275 construction firms that went out of business in the UK in July this year, 156 were specialist sub-contractors. 

In 2022, it is estimated small and medium-sized enterprises (SMEs) in the UK were owed on average £22,000 in late payments. 

“Improving payment culture in the UK will support smaller businesses, many of which do not have the resources to accommodate long or late payments from their business customers and could boost the economy by £2.5 billion annually,” wrote the DBT. 

Amey, Costain, ISG, and Osborne recently ranked among the industry’s fastest-paying contractors, according to the UK Government’s Duty to Report on Payment Practices and Performance, followed closely by Lendlease, Ferrovial, and Morgan Sindall. 

The new measures  

Under new legislation, fresh payment performance reporting obligations will include a value metric, so businesses and commentators can see the value of invoices, invoices paid late, and disputed invoices. 

DBT will also introduce reporting on retention payments for businesses in the construction sector.  

Smaller businesses will get advice on negotiating better payment terms and how going digital could speed up payment and help manage cash flow. 

If enacted, the Small Business Commissioner could also receive more powers to undertake investigations and publish reports from anonymous information and intelligence.   

“Small businesses form a crucial part of large companies’ supply chains. Without them, they couldn’t do business. It’s only right that they should be paid promptly for their services,” said small business minister, Kevin Hollinrake. 

“SMEs that are paid on time can do more business, scale up and make more profits, delivering growth for the economy.” 

Enjoyed this? Try Mace seizes on ‘growing’ London office market 

Get industry news in 5 minutes!

A daily email that makes industry news enjoyable. It’s completely free.