Large UK companies will soon be required to report how long they take to pay suppliers, as part of a government crackdown on late payments to small and medium-sized enterprises (SMEs). Business Secretary Jonathan Reynolds is expected to unveil a new small business strategy in August, aimed at strengthening SME support and addressing cash flow challenges caused by delayed payments.
Under the proposed measures, companies with more than 250 employees will need to include detailed information on payment practices in their annual reports. Audit committees will also be given greater responsibilities to hold management accountable for addressing the issue. “Because audit committees are made up of non-executives, they can take a more independent view and push executive teams and boards to follow best practices,” said a person familiar with the plans.
Draft Legislation
Earlier this month, the government introduced draft secondary legislation in Parliament titled the Companies (Directors’ Report Payment Reporting) Regulations 2025 that would mandate payment performance disclosure in annual reports. The legislation is expected to be debated and passed in the autumn after Parliament reconvenes.
A broader consultation on additional legislative proposals to tackle late payments is also expected to be launched alongside the new strategy.
Research by the Federation of Small Businesses (FSB) shows that more than half of the UK’s 5.5 million SMEs representing around 2.8 million of the population experience delayed payments, with some entrepreneurs resorting to personal loans to keep their businesses afloat. The government believes requiring disclosure in annual reports will bring much-needed transparency and pressure companies to improve their payment behaviour. Currently, businesses only submit data to a government platform where it must be searched manually.
“There’s a perception that delaying payments helps cut costs,” said one source. “But with audit committees involved, there’s hope companies will feel more pressure to act responsibly.”
Protection For Small Businesses
Since 2021, the Good Business Pays campaign has encouraged large firms to commit to faster payments—specifically, to pay 95% of invoices within 30 days. Companies that meet these standards receive public recognition. Craig Beaumont, executive director at the FSB, said: “We’ve long pushed for reforms, including Good Business Pays and stronger audit committee roles, so we’re pleased to see these changes moving forward.”
Michelle Ovens, founder of Small Business Britain and adviser to the Board of Trade, welcomed the measures but stressed the need for a culture shift. “It’s a good step to make long payment terms unacceptable,” she said, “but real change will come from changing the mindset of big businesses, not just through regulation.”
Reynolds’ upcoming strategy will also launch a new “business growth service”, consolidating various government support schemes for SMEs such as the Export Academy and the Help to Grow: Management Course.
Additionally, the strategy is expected to address the widespread use of personal guarantees by banks when issuing loans to entrepreneurs. While the government does not plan to ban the practice, it aims to reduce its prevalence. “If you start a limited company and borrow money, banks often demand a personal guarantee that puts your home at risk,” said a source. A government official added: “There’s no blanket use of these guarantees, but they will be reviewed as part of broader access-to-finance reforms.”
A spokesperson for the Department for Business and Trade said: “We look forward to publishing a small business strategy that marks an important first step in our commitment to helping SMEs grow and succeed.”
