Culture vs Legislation: Why the Small Business Protections Bill is only half the battle
The UK has been trying to legislate its way out of a late payment crisis for nearly three decades. From the original Late Payment of Conduct Debts Acts in 1998, to the creation of the voluntary Prompt Payment Code in 2008 and the implementation of mandatory reporting regulation in 2017, successive governments have attempted to curb a problem that drains £11bn from the economy annually.
The introduction of the Small Business Protections Bill marks the latest – and arguably most forceful – attempt to break this deadlock. By proposing a hard 60-day cap on payment terms for large firms, mandatory statutory interest, and giving the Small Business Commissioner the tools to levy substantial fines, Starmer’s government signalled its intent to build the toughest payment regime in the G7, but with new leadership on the horizon, Time Finance is urging Starmer’s successor to press forward with these plans to give SMEs the best possible outcome.
In the lending and commercial finance sector, we know all too well how overdue this intervention is. Late payment acts as a structural drag on SMEs’ growth, trapping vital funds that should be used for investment. While this new bill is very welcome, a realistic look at the market suggests that changing the law is potentially the easiest part. The issue of late payment is so deeply rooted in business culture, and an immediate flaw in these new measures is the government’s assumption that larger businesses will take note and change their payment habits accordingly.
The Power Imbalance
The new bill arms small businesses with significant new rights, but the critical question is: will business owners ever feel secure and bold enough to enforce them? The uncomfortable truth is that these measures assume a level playing field, which simply does not exist. The reality for an SME that secures a milestone contract with a major supermarket, for example, is that if the buyer breaches the 60-day limit, the SME faces a difficult choice. On paper, they have the legal right to demand mandatory interest. In reality, doing so risks upsetting their new client and jeopardising future work.
The fear of damaging relationships or losing future work, may mean that many small businesses simply don’t use the new powers awarded to them. And a right you can’t safely use is no right at all. If we want real change, the government and corporate boards must stop reviewing prompt payment as a tick box exercise and start treating it as a core piece in rebuilding the UK’s economy.
Unlocking the capital SMEs need
Until that cultural shift happens, the UK’s 5.7 million SMEs need to navigate the market as it exists today. Our role as an independent lender is to support our clients in protecting their working capital. Independent and flexible providers can offer vital solutions, such as Invoice Finance, which unlocks working capital in a business through the value of its unpaid invoices.
When a business has access to this cash, they unlock the key to financial freedom, allowing the business to reinvest, thrivePRE and grow as a result. This new bill will be welcome news for many businesses, but as we anticipate a change in leadership, it’s crucial that driving this forward remains a priority and doesn’t stall. While the new Small Business Protections Bill provides a vital legal framework, it feels like a positive step in the right direction, rather than the final destination. Larger firms must recognise that a fairly treated supply chain provides vast economic benefits for all. Until then, independent lenders like us at Time Finance must remain focused on providing the practical, independent funding solutions SMEs really need to protect their cash and dictate their own future.”