The Small Business Protections Bill, formally known as the Commercial Payments Bill, was introduced to the House of Lords on 19 May 2026, marking what the Government has described as the most significant legislative intervention on late payments in a generation. First announced in March and confirmed in the King’s Speech, the Bill delivers the toughest crackdown on late payments in over twenty-five years, putting a clear and enforceable duty on large firms to pay smaller suppliers on time.

The scale of the problem the legislation seeks to address is considerable. Late payments are estimated to be the cause of 38 business closures every single day (the equivalent of over a thousand per month), forcing business owners to spend hours chasing invoices rather than running their operations, thus putting jobs and livelihoods at risk.

What the Bill Proposes

The Bill introduces four principal reforms. First, a 60-day cap on payment terms for large firms paying smaller suppliers. Second, mandatory interest on late payments. Third, new enforcement powers for the Small Business Commissioner, including the ability to investigate poor payment practices, adjudicate disputes, and issue financial penalties against persistent offenders. Fourth, a ban on the practice of withholding retention payments under construction contracts.

On transparency and accountability, boards or audit committees of large companies with a history of persistent late payments will be required to report publicly on their poor payment performance and the steps being taken to address it.

What Happens Next

The Bill will need to pass through a full series of parliamentary stages before it becomes law. The Government has indicated it sought to balance stronger protections for smaller suppliers with concerns raised by larger businesses during consultation, including through limited exemptions from maximum payment terms. The detail of those exemptions, and the precise scope of the Commissioner’s new penalty powers, will be matters to watch closely as the Bill progresses.

Consideration for Businesses

Businesses operating in supply chains, whether as large firms subject to the new obligations or as smaller suppliers seeking to benefit from them, should begin reviewing their existing payment terms and contractual arrangements now. We will continue to monitor the Bill’s progress and publish further commentary as and when the legislative picture becomes clearer.