Live Updates
By: Scott Sanchon, Trade Treasury Payments
(Based on Mayer Brown Report by Charles Thain)
The UK government has announced plans on 24 March 2026 to introduce major late payment reforms, including a 60-day cap on payment terms, as its response to the “Late Payment Consultation: Time to Pay Up,” which received over 850 responses from all sectors across the United Kingdom.
The publication emphasised how the UK official is drawing the line under late payment, announcing plans for its reform in over 25 years. Furthermore, the proposed measures will be introduced to the parliament once time becomes available. As a result, the United Kingdom will launch the most structured legal framework for this financial discipline in the G7.
Following the announcement, the Government disclosed a series of key proposals to strengthen payments practices across the country. The measures included the expansion of the Small Business Commissioner’s powers to investigate businesses suspected of poor payment activities and the ability to impose fines on persistent late payers.
On a broader level, the Government official further announced that requirements for large UK businesses that have made a significant proportion of their payments late will be required to publish commentary explaining their financial performance and actions to improve it.
Moreover, the reform will introduce a legal term of maximum payment of 60 days for business-to-business transactions, with a formal deadline for disputing invoices to support suppliers. All commercial contracts will also require an additional 8% of the rate payment interest from the Bank of England base rate. Consequently, the reform will remove options for businesses to negotiate alternative arrangements.
In contrast, the concerns raised by larger businesses have become key issues across industries. These included potential impacts on working capital, international competitiveness, and other adverse outcomes related to how businesses contract with one another. Larger businesses argued that shorter payment times may result in “lost cashflow,” which diminishes bargaining power on the international stage.
These concerns pressure the UK government to take it into consideration. Some impacts are unavoidable. While major disruption to businesses’ working capital, they reflect deliberate policy design rather than unintended consequences. The proposal is intended to foster payment between businesses, which results in larger businesses needing to transfer their working capital to smaller suppliers where their payment terms are more flexible.
To maintain international competitiveness, the Government intends to allow limited exemptions for contracts where businesses are of the same size. For example, if two larger businesses are contracting with one another, the maximum payment term will not apply. On the other hand, if the contracts are performed between a smaller business and a larger business, the restrictions will be enforced.
Despite the disruption from the new late payment structure, moving forward will require a combination of primary legislation and secondary legislation to enact. This reform aims to legislate at the earliest opportunity.