UK fines for late payers need SME-focused fix

By Vriti Gothi

The UK government’s proposal to fine persistent late payers has been welcomed as a step towards restoring fairness in the supply chain. However, Andreas Mjelde, CEO and co-founder of B2B payments platform Two, warns that penalties alone will not resolve the structural causes of the late payment crisis affecting UK SMEs.

Government data indicates that 38 small businesses fail daily due to cash flow issues linked to late payments, costing the economy an estimated £11 billion annually. While fines aim to deter repeat offenders, Mjelde cautions that unless the recovered funds go directly to the SMEs impacted, the measure may be little more than a symbolic deterrent.

Andreas Mjelde, CEO and co-founder, Two “While fining persistent late payers is a step forward in terms of restoring fairness and autonomy to the small business owners who power the UK economy, I worry these penalties miss the real problem. If the fines go to the government rather than the SMEs who desperately need cash flow, large corporations might simply treat them as a cost of doing business. Why would this work? Because owing money to an SME is easy to ignore. Owing money to HMRC? That’s a different story. And this isn’t fantasy the infrastructure already exists. At Two, we provide instant payment to suppliers while handling collections. The government could leverage similar technology, integrating with existing accounting systems to make the process seamless”

Instead, he advocates for a government-backed receivables fund. Under the proposal, SMEs could transfer overdue invoices to the government and receive immediate payment. The government would then collect from the late-paying corporation, applying aggressive penalties and interest.

Such a framework, Mjelde argues, would combine regulatory teeth with FinTech-enabled efficiency, making late payments “structurally impossible.” By leveraging instant payment solutions, the approach could inject vital liquidity into the SME sector while ensuring large corporates bear the cost of delayed settlements.

As policymakers continue to refine the UK’s late payment reforms, industry experts emphasise that the real opportunity lies in pairing penalties for offenders with technology-driven prevention measures a model that could protect the SMEs powering the UK economy while dismantling late payment culture once and for all.