Market Commentary

Why the 2026 Late Payment Reform Won't Fix Britain's Payment Problem

The intent is right. The track record on enforcement is not.

Simon Carter

Chief Commercial Officer · 23 July 2026 · 5 min read

Gold pound sign on dark navy background representing the UK late payment problem

Market Commentary

Late payment reform: welcome legislation, the same enforcement gap

This week's reporting in The Times on the government's £11 billion overhaul of late payment law is worth pausing on - not because the intent is wrong, but because we've been here before. The new legislation, due before the House of Lords, would force large companies to pay smaller suppliers within 60 days, ban the use of cryptocurrency as a contractual payment term, stop firms hiding behind ESG clauses to delay supplier payments, and hand the Small Business Commissioner's office stronger investigatory and enforcement powers. Peers including Lord Leigh of Hurley are also pushing for a "cold shoulder" provision, which would see the worst offenders frozen out of public procurement. All of this is sensible. None of it is new.

Years since the Prompt Payment Code launched in 2008, with no material improvement in late payment rates

~55

Companies removed or suspended from the Prompt Payment Code across enforcement rounds since 2019

Criminal prosecutions for breaching mandatory payment practice reporting rules

The enforcement gap

Philip King, who ran the Chartered Institute of Credit Management and served as Small Business Commissioner during the pandemic, makes the point that matters most: previous crackdowns have failed largely because they were never enforced. Large businesses and partnerships already have a legal duty to report on their payment practices twice a year, and failing to do so is a criminal offence. Yet by his estimate only around half of the companies obliged to file are actually doing so - and there have been no criminal prosecutions for non-compliance.

Out of curiosity, we checked the public record ourselves. The Prompt Payment Code has existed since December 2008 - coming up on 18 years - and across that entire period, the enforcement actions taken amount to a few dozen companies being removed or suspended from the code, concentrated in short clusters: around 55 businesses across three quarterly rounds in 2019 (including names as recognisable as Rolls-Royce, Vodafone, Balfour Beatty and SSE), and a further high-profile removal of Diageo in 2022. For a code that hundreds of large companies have signed, the enforcement record is thin.

King's warning that the reform "could be a car crash" if enforcement isn't taken seriously looks less like caution and more like a prediction based on precedent. A new maximum payment term is only as good as the willingness to penalise the businesses that ignore it - and the track record on that front is not encouraging.

"It could be a car crash if it's not properly thought through."
Philip King, former Small Business Commissioner, on the late payment reform bill

Where this leaves smaller businesses

Here's the part of the story that doesn't always make the headlines: while legislation and enforcement debates play out in the Lords, the cash flow gap they're trying to close is a live problem for businesses today. A supplier waiting 60, 90, or 120 days to be paid by a much larger customer still has wages to meet and stock to buy in the meantime. Regulation, even good regulation, moves on a different timetable to a Friday payroll run.

This is precisely the gap Spark Finance exists to close. We're not in the business of waiting for a large customer to do the right thing - we're in the business of making sure the smaller business on the other end of that invoice isn't held hostage to someone else's payment terms. Invoice finance exists because the funding requirement is very often created by someone else's decision to pay late, not by any weakness in the business being funded. Put simply: the customer sits at the top of the supply chain, the small business bears the cash flow risk - and that's the imbalance invoice finance corrects.

Better legislation and real enforcement would be welcome, and we'd support any move that finally gives the Small Business Commissioner's office the teeth to act on the reports already sitting in front of it. But until enforcement catches up with intent, the smartest thing a business can do is stop treating its own cash flow as hostage to a customer's payment culture and start treating funding as a strategic tool rather than a last resort.

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That's the conversation we want to be having

The late payment reform bill deserves to pass, and the intent behind it is right. But the history of this problem is a history of rules that exist and aren't used, duties that are clear and aren't met, and enforcement powers that sit unused because no one is willing to pull the trigger. A new maximum payment term won't change that unless the willingness to enforce it is there from day one. The track record says it rarely is.

For the businesses on the wrong end of this today, the practical answer is to build a cash flow structure that doesn't depend on customers choosing to pay on time. Invoice finance, tighter payment terms, and better credit control are all available now. That's where we focus - and that's the conversation we want to be having.

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About the author

Simon Carter

Chief Commercial Officer, Spark Finance

Simon Carter is Chief Commercial Officer at Spark Finance, working with UK SMEs and a panel of more than 100 lenders across invoice finance, asset finance and working capital.

Invoice FinanceCash FlowSME Finance

Why the 2026 Late Payment Reform Won't Fix Britain's Payment Problem

The enforcement gap

Where this leaves smaller businesses

That's the conversation we want to be having

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