Commercial Payments Bill [HL]: HL Bill 4 of 2026–27

Approximate read time: 35 minutes

Small and medium-sized enterprises (SMEs), made up 99.9% of the 5.7mn private sector businesses in the UK at the start of 2025. In the same period SMEs accounted for 60% of employment and 51% turnover. Recent evidence given the to the House of Commons Business and Trade Committee suggests that 44% of invoices from SMEs are paid late. Late payments are estimated to cost the UK economy £11bn per year, with 14,000 business closing each year due to late payments. The committee found the problem particularly pronounced in the construction sector and drew attention to the use of practices such as retention and uncapped liabilities in construction contracts.  

The 2026 King’s Speech included a commitment to introduce legislation to tackle late payments to small businesses. The Commercial Payments Bill [HL] was introduced in the House of Lords on 19 May 2026 and is due to receive its second reading on 9 June 2026. The bill includes provisions which the government said would: 

• improve payment practice such as imposing stricter maximum payment terms in contracts within scope 

• prohibit the deduction and withholding of retention sums under a construction contract 

• provide the Small Business Commissioner (SBC) with stronger powers including the power to adjudicate contractual payment disputes, investigate persistent poor payment practices and take enforcement action, and impose financial penalties on businesses for breach of their statutory publication requirements 

Most provisions in the bill would extend and apply to the whole of the UK. Late payments are a devolved matter for Scotland and Wales and transferred in Northern Ireland. The government has said it would work closely with the devolved authorities to ensure regulatory alignment. The measures would apply only to UK-to-UK business transactions and would not affect global supply chains or international trade. 

Cover image by  Magnific on Freepik.