Proposals include cutting maximum payment time from 60 days to 45 days

The government is planning to crack down on late payments with proposals that will give more powers to the Small Business Commissioner and reduce the maximum time companies are allowed to settle up from 60 days to 45.

The government said the issue costs the UK economy 拢11bn a year and said the reforms will be the toughest on the issue within the G7.

Under the laws, smaller firms will be allowed to wield fines against bigger firms 鈥渨ho persistently choose to pay their suppliers late鈥�.

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The government said late payment costs the UK economy 拢11bn a year

It added: 鈥淭he Small Business Commissioner will be given new powers to carry out spot checks and enforce a 30-day invoice verification period to speed up resolutions to disputes. The upcoming legislation will also introduce maximum payment terms of 60 days, reducing to 45 days, giving firms certainty they鈥檒l be paid on time.鈥�

Prime minister Keir Starmer said: 鈥淔rom builders and electricians to freelance designers and manufacturers鈥攖oo many hardworking people are being forced to spend precious hours chasing payments instead of doing what they do best 鈥� growing their businesses.

鈥淚t鈥檚 unfair, it鈥檚 exhausting, and it鈥檚 holding Britain back. So, our message is clear: it鈥檚 time to pay up.鈥�

One of the options being looked at is banning the use of retentions.

A consultation document says: 鈥淭he policy will amend Part 2 of the Housing Grants, Construction and Regeneration Act (1996), introducing requirements on the use of retention payments in the construction sector.

鈥淎t this stage, the preferred option is introducing a ban on the withholding of cash retentions, although a second option will be included in the consultation (the introduction of requirements to protect retention funds from insolvency and late or non-payment).鈥�

David Allen, spokesperson for civil engineering trade body CECA, said: 鈥淲e welcome the UK Government鈥檚 recognition of this issue and its intention to introduce the toughest late payment laws in the G7.

鈥淏ut legislation alone will not be enough to fix a culture in which firms often wait on average more than six weeks to be paid. We need a genuine cultural change across the supply chain from clients and larger businesses so that fair and prompt payment becomes the norm.鈥�

And David Barnes, CIOB鈥檚 head of policy and public affairs, added: 鈥淭he introduction of tougher payment legislation, greater enforcement powers for the Small Business Commissioner, and mandatory board-level scrutiny of payment practices are significant steps forward. These changes will help create a more stable, fair, and resilient construction supply chain.鈥�

The business and trade department said its consultation on its plans will run until 23 October

It also said it was allocating 拢4bn, including 69,000 start-up loans, to boost growth and support more small businesses.