When the government announced its landmark late payment clampdown in July 2025
When the government announced its landmark late payment clampdown in July 2025, we at IPSE were among the first to praise what appeared to be an ambitious set of proposals.
At last, ministers seemed to grasp that late payment is one of the biggest barriers to productivity and business survival in the UK, writes Josh Toovey, senior research and policy officer at The Association of Independent Professionals and the Self-Employed (IPSE).
And it was heartening to see the Small Business Commissioner, Emma Jones, on ContractorUK reaching out to unpaid limited company contractors to confirm that the "comprehensive set of proposals" would "increase the requirements on large business."
Calls for a U-turn
But there's a twist.
An item in the mainstream press now suggests that big businesses have lobbied hard to water down the government's bold anti-late payment proposals.
Apparently, they'd rather keep small businesses funding their cash flow for free.
We've spent the last few weeks warning ministers and business department officials that any watered-down version of the "toughest payments laws in G7" will simply not work in effectively tackling late payment for contractors and other small businesses.
What contractor late payment looks like
Every limited company contractor knows the story. You do the work. You send the invoice. Then you wait. And wait. And maybe chase. Thirty days become 60; sixty becomes 90.
Meanwhile, your bills, insurance and HMRC tax deadlines don't wait.
Contractors are forced to dip into savings, chase clients who should know better, or even take out credit to plug the gap.
The government's bold, five-part plan to tackle late payment
To its credit, the government finally recognised this imbalance on July 30th 2025.
That's when it published a consultation on tackling poor payment practices, and it contained a set of reforms that would genuinely shift the power dynamic.
Broadly, the late payments clampdown has five parts:
- A legal cap of 60 days for payment terms between UK businesses, with a view to cutting that further to 45 days;
- A 30-day window to dispute an invoice, after which it's treated as undisputed and interest begins to accrue;
- Automatic statutory interest on late payments;
- Tougher reporting obligations for large businesses on their payment performance;
- Expanded powers for the Small Business Commissioner to investigate and fine repeat offenders.
These proposals are bold, pragmatic, and long overdue.
And they showed that years of coordinated campaigning from IPSE and other business groups had finally worked in getting the message across.
Big business circling for the kill
Make no mistake, the reported backlash against this package by big business is based on protecting profit at the expense of the smallest businesses in the supply chain.
One common argument we've heard emanating from UK plc is that the new late payment rules (in the shape of the five) might create cashflow challenges.
Ironically, such pressures have existed all along, but they have traditionally been felt most acutely by smaller businesses at the end of the chain.
Another reason for contractors to be on Autumn Budget watch
For years, large corporates have effectively used the UK's smallest businesses as informal lenders. Long payment terms act as free working capital, while delayed payments boost their balance sheets. So yes, under the reform, there will be pressure on big businesses.
In truth, though, that pressure already exists. The question now is whether the government will buckle under it or stand its ground. And perhaps contractors should be on the lookout on November 26th, because if it buckles, Autumn Budget 2025 might be an easy way for the government to bury such bad news by drowning it out with the sheer volume of other announcements.
What IPSE makes of these potentially landmark anti-late payment rules
Our view is that implementing these measures will likely require some effort from companies. But that's no reason to shy away. We will only get the contractor and small business sector on a stronger, fairer footing if industry moves as one toward a higher standard.
Crucially, the government has already received widespread praise for proposing these measures.
It cannot legitimately bask in the initial applause and then quietly abandon the plan when vested interests push back.
Doing so would be having its cake and eating it, and it would send a clear signal that the smallest businesses remain the most vulnerable.
Our message to ministers told to U-turn the late payment clampdown
This isn't new territory for us. IPSE has campaigned on late payment for years because we've seen the damage it causes.
Late payment:
- Stifles growth;
- Crushes confidence, and;
- Pushes skilled people out of self-employment altogether.
Therefore, the proposals in the Department for Business and Trade's "Late payments consultation: tackling poor payment practices" are not anti-business. They're pro-fairness. And fair, timely payment is what allows freelancers and contractors to thrive.
That's why our organisation is now urging the government — stay bold. Don't let this crackdown on late payment slip into another half-measure, dressed up as reform.
The cost of backtracking would be unconscionable
If the government gives in to corporate lobbying and waters down these measures, the consequences will be devastating and not in theory, but in reality. Small suppliers will continue to be treated as unpaid banks. Cash-flow stress will continue to drive business closures. And the message will be clear: the UK still rewards size over fairness.
