Late payment in the UK construction industry: 5 ways to speed up payment

“For many firms, especially in construction, payment delays of 60 to 90 days have become routine, turning small businesses into involuntary lenders for larger companies and triggering cash shortages right down the supply chain.”

- Small business strategy, Fifteenth Report of Session 2024–26

The construction industry is particularly affected by late payment, with many firms struggling to maintain cashflow due to slow payments, the high cost of raw materials and the immediate operational expenses of getting a building project off the ground.

Almost 350 construction businesses went under in March 2026, marking a 14% increase on the previous month, according to the latest official figures.

So, what’s the answer to these late payment issues?

Introduction of the Small Business Protections Bill

The Small Business Protections Bill (formerly known as the Commercial Payments Bill) has been created by the current government to crack down on the issue of late payments.

Measures being introduced include:

• The Small Business Protections Bill being introduced to Parliament to back small businesses with the toughest late payment regime in the G7.
• Stronger new powers for the Small Business Commissioner to investigate, adjudicate disputes and fine persistent late payers with potential penalties worth tens of millions.
• A new 60-day cap on payment terms for large firms, mandatory interest on late payments, and action to ban the practice of retentions in construction.

The new powers and legislation give UK companies far greater powers to chase late payers and to insist on payment terms that will be beneficial to their overall cash position.

If you’re a construction business that’s still suffering from slow and delayed payment of your invoices, there are proactive ways to tackle these late payments:

→ Enforce the 60-day payment cap

Hold large clients legally accountable to the new mandatory 60-day maximum payment term, and make sure your contracts reflect this limit to prevent commercial buyers from dictating excessive payment delays.

→ Claim mandatory late payment interest

Automatically apply the statutory late payment interest rate, set at 8% above the Bank of England base rate, onto overdue invoices to penalise late payers and recoup your financing costs.

→ Demand full construction fees

Make use of the new legislative ban on construction retentions to eliminate the practice of clients withholding cash from your invoices. This will immediately unlock funds to boost your operational cashflow.

→ Escalate disputes to the Commissioner

Use the newly strengthened Small Business Commissioner to investigate unfair payment practices, resolve contract disputes and trigger financial penalties against large clients that habitually pay your bills late.

→ Review large client public records

Review the published payment records of potential corporate clients, giving you the ability to vet potential clients and prioritise contracts with financially responsible partners.