Small Business Protections Bill: which sectors stand to gain most from late payment crisis crackdown
Small businesses in sectors including legal, healthcare and IT could be among the biggest winners from the government’s new crackdown on late payments, according to new research from Hiscox.
The Small Business Protections Bill, introduced to Parliament on Tuesday and now progressing through the House of Lords, will introduce sweeping new rules aimed at tackling late payments between large firms and their smaller suppliers. The government says the reforms will deliver the toughest late payment regime in the G7, with measures designed to improve cash flow and reduce the financial pressure facing millions of small businesses across the UK.
Sectors most affected by late payments
The impact of late payments is not evenly spread across the economy, according to Hiscox’s research, with some sectors carrying significantly higher unpaid invoice burdens than others.
Based on a survey of 1,000 sole traders, small business owners and directors, Hiscox found:
- Legal businesses are owed an average of £15,641.79 in late payments annually
- Healthcare businesses £15,467.89
- IT & Telecoms £14,671.76
- Finance £14,590.63
- Manufacturing & Utilities £13,240.30
Across all SMEs, Hiscox found:
- The average small business is owed £12,357.58 in late payments annually
- Almost a quarter (23%) of all payments arrive late
- Businesses spend the equivalent of 331 cumulative days annually waiting for overdue invoices
- Small businesses chase an average of 14 late payments each year
What the new Bill would change
Under the proposals, large companies would face stricter rules when paying smaller suppliers, including:
- A legal maximum 60-day payment term
- Mandatory interest on overdue invoices, set at 8% above the Bank of England base rate
- Stronger enforcement powers for the Small Business Commissioner
- Financial penalties for persistent late payers
- A ban on withholding retention payments in construction contracts
Ministers say the changes are intended to tackle a problem that costs the UK economy a significant amount and contributes to business closures.
Prime Minister Keir Starmer said small businesses are “the backbone of our economy”.
What the reforms could mean for SMEs
Hiscox’s findings suggest sectors such as legal, healthcare, IT and finance (where average unpaid invoices are highest) could see the most immediate benefit if enforcement and payment timelines are tightened.
IT & Telecoms firms also reported the highest number of late payments on average (18 per year), followed by finance (17) and healthcare businesses (16). Retail, catering and leisure businesses report an average of 15 late payments per year, while legal businesses report an average of 14.
“Cash flow is the lifeblood”
Nick Thornhill, direct and partnerships director at Hiscox, said: “As a small business insurer, we know that cash flow is the lifeblood of any business. Yet late payments remain one of the biggest challenges for entrepreneurs and small businesses. Knock on effects of late payments can disrupt cash flow, impact payroll, delay investment, and seriously compromise a business.”
Case study: “There’s always the fear someone won’t pay up”
One small business owner surveyed by Hiscox said: “There’s always the fear that someone won’t pay up. I’ve had it only twice in nine years where an invoice hasn’t been paid at all. The first time it happened, they were my only client, and it meant I had no money for two months.”
Wider SME support measures
The Bill forms part of a wider government package aimed at supporting small businesses, including measures on business rates relief, apprenticeship incentives, childcare costs, energy bills and access to finance. The legislation is expected to continue its passage through the House of Lords in the coming weeks.