The Prompt Payment Code – the government’s flagship scheme to encourage large companies to pay small suppliers on time – remains voluntary. In 2025, only 2,300 organisations have signed up, a tiny fraction of the thousands of large firms that routinely delay payments. The Federation of Small Businesses reports that the average SME is still owed £22,000 in overdue invoices, with late payments costing the UK economy £2.5 billion annually in lost cashflow, productivity, and insolvencies.
The consequences are brutal. A small engineering firm waits 90 days for a £45,000 invoice from a major contractor. That delay means the firm can’t pay its own suppliers, staff, or tax on time. Many small businesses report that cashflow problems caused by late payments are a leading cause of closure – one in four insolvencies according to FSB research. Large companies know they can stretch terms with almost no consequence; SMEs have no leverage.
Voluntary codes do not work. The current system relies on goodwill, and goodwill is in short supply. Spain, France, and Mexico have mandatory 30-day payment laws with automatic fines – and average payment times have fallen by 40–50 %. Britain’s voluntary approach has failed for over a decade.
The solution is simple, enforceable, and long overdue:
- Make 30-day payment terms mandatory on all commercial contracts over £50,000.
- Apply automatic interest at 8 % above base rate (current statutory rate) from day 31 – no need for court action to claim it.
- Introduce civil penalties of £1,000 per late invoice for persistent offenders (over 5 late payments in a 12-month period).
- Allow SMEs to opt out of the 30-day rule only if both parties agree in writing and the alternative is no longer than 60 days.
- Estimated benefit to SMEs: £2.5 billion in improved cashflow within the first full year of enforcement (FSB economic modelling).
This is not about punishing large companies; it is about basic fairness. Small suppliers have already earned the money – they should receive it when it is due. Enforce the rule, and watch cashflow improve, insolvencies fall, and confidence return.
The 1832 Club is fighting for these changes. The more members we have, the louder our voice in Westminster.
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