Industry welcomes long awaited Government support SMEs

1 Background
2 The government plan
3 Comments
4 Electrical contractors' perspective
5 Related articles on Designing Buildings

[edit] Background

On 30 July, 2025 the UK government announced the most significant reforms in 25 years to combat late payments, an issue that costs the economy £11 billion annually and forces 38 businesses to shut down each day. These measures are part of a broader strategy to back small businesses and fuel economic growth under the “Plan for Change.” Central to this initiative is a new set of laws that will give the UK the toughest stance on late payments amongst G7 countries.

Small and medium-sized enterprises (SMEs) form the backbone of the UK economy, employing 60% of the workforce and generating £2.8 trillion in turnover. However, these firms often struggle with systemic challenges, particularly late payments and difficulty accessing finance. These issues hinder growth and investment opportunities for small businesses, many of which operate on tight margins.

[edit] The government plan

To tackle late payments, the government will empower the Small Business Commissioner with new enforcement capabilities. This includes the authority to impose substantial fines on large firms that consistently pay suppliers late. Additionally, the Commissioner will be able to perform spot checks and enforce a 30-day invoice verification period to speed up dispute resolution. New legislation will also mandate a maximum payment term of 60 days, with plans to reduce it further to 45 days. Audit committees will be legally required to scrutinise payment practices at the board level, and mandatory interest charges will be imposed on late payments, ensuring larger companies treat small suppliers fairly.

The aim is to provide small businesses with certainty over payments and reduce the time they spend chasing unpaid invoices. This move is expected to improve cash flow, reduce business closures, and allow firms to reinvest in growth and innovation. Overall, the reforms are designed to eliminate the culture of late payments, which has long plagued SMEs.

In addition to addressing payment issues, the government is tackling a second major barrier for small businesses: access to finance. Many SMEs, especially new or smaller firms, find it difficult to secure loans or funding. To support them, the government is rolling out a £4 billion financial support package. This includes £1 billion for 69,000 Start-Up Loans, coupled with mentoring support to nurture a new generation of entrepreneurs.

A further £3 billion will be allocated to the British Business Bank (BBB), increasing its total guarantee to £5 billion under the ENABLE programme. This scheme provides lenders with a government-backed guarantee, encouraging them to offer loans to smaller businesses on more favourable terms, such as lower interest rates. These efforts aim to make finance more accessible and fairer for small firms, allowing them to invest, expand, or simply stay afloat.

The potential economic impact of these reforms is significant. If SME growth is accelerated by just 1% per year, it could add £320 billion to the UK economy by 2030. The reforms build on existing government initiatives such as reducing red tape, introducing High Street Rental Auctions to revitalise empty commercial properties, revamping the Board of Trade to support small business exports, and launching the new Business Growth Service to provide SMEs with essential support.

The government has also committed to permanently lowering business rates multipliers for the retail, hospitality, and leisure sectors, which have been particularly hard hit in recent years. Through a combination of legislative reform, financial support, and strategic initiatives, this plan marks a comprehensive and ambitious effort to level the playing field for small businesses and unlock their full potential as drivers of economic growth.

[edit] Comments

Prime Minister Keir Starmer said: “From builders and electricians to freelance designers and manufacturers—too many hardworking people are being forced to spend precious hours chasing payments instead of doing what they do best – growing their businesses. It’s unfair, it’s exhausting, and it’s holding Britain back. So, our message is clear: it’s time to pay up. Through our Small Business Plan, we’re not only tackling the scourge of late payments once and for all, but we’re giving small business owners the backing and stability they need for their business to thrive, driving growth across the country through our Plan for Change.”

Policy Chair of the Federation of Small Businesses (FSB), Tina McKenzie, said: “Making sure businesses are paid on time, that our high streets thrive, and creating conditions in which everyone can start and succeed in business are crucial priorities for small businesses, communities and the economy. It’s very welcome that the Prime Minister has today made them his Government’s priorities. I’m pleased that FSB and the Government have been able to work in lockstep on the bold and ambitious measures needed to tackle the scourge of late payment through legislation, and other pro-growth, pro-small business measures. Today’s plan is an encouraging commitment from the Government to take the side of small businesses in the great growth challenge ahead.”

Rob Driscoll, ECA Director of Legal & Business, commented on behalf of Actuate UK’s Business Group: “Finally, Government is consulting on how best to reconcile unfair and delayed payment practices. In recognition of the need to ‘go further, faster’, Government’s engagement on how to reform retentions marks a seminal once-in-a-generation moment for the industry to come together and shape reform in an area which has stifled growth, innovation and training, crippling supply-chain cash-flow and amplifying the repercussions of insolvency for over a century. Let’s hope industry can come together, give clients the comfort they need and suppliers the protect they need, in order to make our industry more resilient to deliver the UK’s built environment.”

[edit] Electrical contractors' perspective

The Electrical Contractors’ Association responded to the government plan saying for decades it has been at the forefront of advising Government and the Construction Leadership Council, on how best to reconcile late and unfair payment practices. It has has helped design, shape and improve payment codes and charters, payment reporting regulations, 30-day payment under the Procurement Act, the Construction Act and requirements that suppliers must pay fairly in order to win more public work.

ECA welcomed the new Government consultation on taking measures against late payments and reforming cash retentions as part of the new Small Business Strategy launched today. The consultation predominantly picks up ideas and strategies ECA has fed into Government over a number of years and goes further than any previous governments have, to date, gone.

The construction industry relies on excessively delayed payment periods, which disproportionally impacts the cash-flow of small and medium sized businesses (SMEs), in particular those within the supply chain such as electrical contractors. ECA has been working to end the unfair practice of retentions for many years. ECA will respond to Government by recommending a solution that is fair, enforceable and sustainable.

The Government’s consultation is part of an economy-wide policy commitment to tackle late payments, support small businesses to thrive, and grow a skilled, competent workforce to deliver housing and infrastructure projects which meet net zero targets. Ninety-nine percent of construction companies are SMEs and poor cash flow is a major concern; construction still holds the unfortunate ‘first’ as the sector of the UK’s economy with more reported insolvencies than any other area of commerce.