UK Late Payment Policy Statistics 2026
The Small Business Commissioner has handled thousands of complaints since its 2017 launch, yet average UK SME payment terms remain well above 30 days. Around 50,000 small businesses close each year partly due to cash flow problems linked to late payment. Government policy including PPN 02/24 and the prompt payment code has shifted compliance expectations, but enforcement remains limited.
Key statistics
Estimated annual cost of late payment to UK small businesses. Source: FSB (Federation of Small Businesses)
Small businesses estimated to close each year in the UK partly due to late payment. Source: FSB (Federation of Small Businesses)
Average payment terms in days agreed by large UK businesses with small suppliers, frequently exceeded in practice. Source: Small Business Commissioner
Complaints and enquiries handled by the Small Business Commissioner since launch in December 2017. Source: Small Business Commissioner Annual Report
Value of payments unlocked for small businesses through Small Business Commissioner interventions to date. Source: Small Business Commissioner
Proportion of FSB members reporting being paid late in the previous 12 months. Source: FSB (Federation of Small Businesses)
Average actual payment time reported by small businesses dealing with large company customers. Source: Pay.UK / Bacs Payment Schemes research
Businesses currently signed up to the Prompt Payment Code. Source: Small Business Commissioner Prompt Payment Code
Maximum payment term mandated under the Prompt Payment Code for large business signatories paying small business suppliers. Source: Small Business Commissioner
Amount owed to small businesses in overdue invoices at any given time, according to FSB estimates. Source: FSB (Federation of Small Businesses)
Procurement Policy Note requiring central government suppliers to demonstrate prompt payment practices as a condition of contract award, effective 2024. Source: UK Government Cabinet Office
Maximum statutory payment term permitted under the Late Payment of Commercial Debts (Interest) Act 1998 for business-to-business transactions (subject to agreed exceptions). Source: UK Government Legislation
Statutory interest rate SMEs are entitled to charge on overdue B2B invoices under the Late Payment of Commercial Debts Act (currently 8% plus 3.75% = 12.50%). Source: UK Government / Bank of England
Fixed debt recovery compensation a creditor can claim per late invoice under the Late Payment of Commercial Debts Act, depending on invoice size. Source: UK Government Legislation
Percentage of small businesses that say they would not charge statutory interest on late invoices for fear of damaging customer relationships. Source: FSB (Federation of Small Businesses)
Large companies and public authorities required to report payment practice data to Companies House under the duty to report regulations. Source: Companies House / UK Government
Proportion of invoices paid late by some large businesses as revealed in their own payment practice reports submitted to Companies House. Source: Companies House Payment Practices Reporting
Small businesses that say late payment has threatened their survival at some point, according to FSB surveys. Source: FSB (Federation of Small Businesses)
What the numbers mean
Late payment remains one of the most persistent structural problems facing UK small and medium-sized businesses. Despite a statutory interest framework dating back to 1998, a Prompt Payment Code with over 2,900 signatories, and the Small Business Commissioner operational since December 2017, average actual payment times continue to exceed agreed terms by a wide margin. Many small businesses report being paid after 56 days on average when dealing with large company customers, well beyond the 30-day limit that Prompt Payment Code signatories are supposed to observe.
The introduction of Procurement Policy Note 02/24 marked a step change in government intent. Central government suppliers must now demonstrate robust payment practices as a condition of contract eligibility, creating a direct commercial incentive for large businesses to settle invoices on time. However, enforcement across the wider private sector remains largely voluntary, and the Small Business Commissioner's powers stop short of binding arbitration or financial penalties in most cases.
The Companies House payment practice reporting duty, which requires large companies to publish their own payment data twice yearly, offers transparency but relies on businesses accurately self-reporting. Analysis of these disclosures has revealed that some large businesses pay more than half of their invoices late. For SMEs caught in these payment gaps, invoice finance products including selective invoice discounting and whole-ledger factoring provide a practical bridge, converting outstanding receivables into working capital without waiting for customers to pay. The statutory interest entitlement of 12.50% (8% plus the Bank of England base rate of 3.75% as of 18 December 2025) exists but is rarely claimed.
FAQs
What is the Small Business Commissioner and what powers does it have?
The Small Business Commissioner is an independent UK public body established under the Enterprise Act 2016 and operational since December 2017. It handles complaints from small businesses about late or unfair payment by larger business customers, provides advice, and can publish details of complaints. However, it cannot impose binding financial penalties on businesses that pay late, which limits its enforcement reach compared with regulators in some other jurisdictions.
What is the Prompt Payment Code and is it legally binding?
The Prompt Payment Code is a voluntary scheme administered by the Small Business Commissioner. Signatories commit to paying small business suppliers within 30 days and larger suppliers within 60 days. It is not legally binding and businesses can be suspended or removed for non-compliance, but there are no financial penalties attached to the code itself. PPN 02/24 has added a harder edge for businesses supplying central government.
Can I charge interest on a late invoice under UK law?
Yes. Under the Late Payment of Commercial Debts (Interest) Act 1998, you are entitled to charge statutory interest at 8% above the Bank of England base rate on overdue B2B invoices. At the current base rate of 3.75%, that means 12.50% per annum. You can also claim fixed compensation of £40, £70, or £100 per invoice depending on its value, plus reasonable debt recovery costs. In practice, most small businesses choose not to exercise this right to protect customer relationships.
What is the Companies House payment practice reporting duty?
Large UK companies and limited liability partnerships meeting two of three size thresholds (over 250 employees, over £36 million turnover, or over £18 million balance sheet total) must publish a report every six months on how quickly they pay invoices, the proportion paid late, and their standard payment terms. These reports are publicly searchable at gov.uk and allow suppliers to check a customer's payment track record before agreeing terms.
How does invoice finance help businesses affected by late payment?
Invoice finance allows businesses to release cash tied up in unpaid customer invoices without waiting for the payment due date. With invoice discounting or factoring, a lender typically advances between 80% and 95% of the invoice face value within 24 to 48 hours of it being raised. This means late payment by a large customer causes far less disruption to day-to-day cash flow. The cost of the facility is usually offset by the working capital benefit, particularly where customers routinely pay beyond agreed terms.
Director, Market Invoice
Oliver leads Market Invoice's editorial and comparison research. With a background in UK commercial finance, he oversees provider analysis, rate verification, and industry reporting across all verticals.
Last reviewed: 26 May 2026