UK proposes 60-day payment cap to tackle SME late payments

The UK government’s latest push to tackle late payments centred on proposals to introduce a 60-day maximum payment deadline has renewed focus on one of the most persistent challenges facing small businesses: delayed cash flows within complex supply chains.

Late payments have long been cited as a constraint on SME growth, with smaller suppliers often bearing the brunt of extended payment cycles imposed by larger buyers. The issue is particularly pronounced in sectors such as construction, where multi-tiered supply chains and uneven bargaining power can lead to systemic delays. Industry observers note that such practices effectively shift working capital burdens downstream, turning late payments into a form of informal financing.

While policymakers are seeking to address the issue through stricter timelines and potential penalties, questions remain about whether regulatory intervention alone can resolve what many describe as a deeply embedded structural and cultural problem.

Pat Bermingham, CEO of Adflex, said the reforms mark progress but fall short of addressing underlying dynamics.“The government’s latest reforms on late payments, including the move towards a 60-day maximum payment deadline, are a step in the right direction and reflect the growing urgency of the issue. But they also highlight a deeper cultural problem—the UK remains one of the few places where it is still considered acceptable to pay small businesses late,” he said.

Bermingham pointed to structural inefficiencies across industries, arguing that long supply chains and contractual complexity continue to enable delayed payments.

“When payments are delayed at the top, the impact cascades and in many cases, late payment becomes an informal financing mechanism,” he noted.

The proposed reforms are expected to increase scrutiny and enforcement, potentially exposing entrenched practices. However, industry participants caution that without addressing liquidity pressures and operational bottlenecks, businesses may treat compliance as a box-ticking exercise rather than fundamentally changing payment behaviour.

Against this backdrop, FinTech solutions are emerging as a key enabler of faster and more predictable payments. Tools such as virtual commercial cards and straight-through processing (STP) are being adopted to automate payment flows, improve transparency, and reduce administrative friction.

Bermingham argued that technology adoption will be critical in translating policy intent into tangible outcomes.

“Stronger penalties for late payments will help expose these practices, but it won’t fix the structural challenges driving them… Without broader change, there is a risk that reforms become a compliance exercise rather than a catalyst for real progress,” he said.

He added that firms investing in modern payment infrastructure could benefit from improved supplier relationships and more efficient working capital management.

“Technology has a key role to play. Solutions such as virtual commercial cards, combined with straight-through processing, are already helping firms automate payments, reduce friction and ensure suppliers are paid faster and more predictably.”

The reforms come at a time when digitalisation of B2B payments is accelerating globally, with regulators and financial institutions increasingly emphasising resilience and transparency across supply chains. In the UK, the success of these measures may depend not only on enforcement, but on the extent to which businesses adopt technologies that make timely payment the default.

“Ultimately, changing the rules is one thing—changing behaviours is another,” Bermingham said. “If the Government is serious about tackling late payments, it needs to go further in supporting businesses to invest in the infrastructure that will drive real change… technology would be a more effective lever.”