“We are unveiling the strongest, most robust changes to payment laws in over a generation – laws that will transform the fortunes of small businesses for years to come and make their day to day lives much easier.”
Those were the words of Peter Kyle, then Business Secretary, back in March 2026 as the Government announced a crackdown on late payments.
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SubscribeBusiness leaders in the UK don’t need to be told that, since then, there have been some notable changes in Westminster. In July, Andy Burnham replaced Kier Starmer as Prime Minister, which in turn resulted in a new-look Cabinet.
Jonathan Reynolds is now the Business Secretary, and the late payment crackdown – or the Small Business Protections Bill, to give it its proper title – has struggled for airtime amidst wholesale policy shifts and new government priorities.
That’s not to say the Bill has been kicked into the proverbial long grass. The Bill was formally introduced in May and will continue to work its way through parliament over the coming months; if it receives sufficient support along the way, it will become law.
Even if some of the initial impetus seems to have fizzled out, this remains a positive development for the UK’s SMEs.
Late payments contribute to cashflow challenges
Make no mistake, late payments are a huge issue for SMEs. Smaller businesses typically have smaller cash reserves – if any – which means the lag between delivering a product or service and receiving payment for it can cripple day-to-day operations, not to mention hindering growth opportunities.
Estimates suggest that, on average, 38 businesses shut their doors every single day because they are not paid on time. That equates to 266 company closures in a week, or almost 14,000 per year. The government predicts that the issue of late payments costs the economy around £11 billion every year.
For the UK’s small and medium businesses to flourish, the plague of late payments must be addressed. Hopefully the new Chancellor John Healey uses the upcoming Autumn Budget (on 28 October) as an opportunity to reaffirm the government’s commitment to the Small Business Protections Bill. What’s more, hopefully he goes further still in the support offered to the country’s 5.7million SMEs.
After all, late payments are just one issue that can affect a business’ cashflow and, in turn, their ability to scale.
How to support SME growth
The current economic landscape and tax regime presents many challenges to SMEs. Business rates, increases to the National Living Wage, broader salary expectations and labour costs, and higher operating costs due to hikes in materials, energy and across supply chains have all placed increasing pressure on small businesses in the past couple of years. This is especially true for staff-heavy businesses such as cafés, salons, garages, and hospitality venues.
As those costs increase, SMEs can often find themselves with financial pinch-points – situations, in other words, when they need to bridge the gap between their current position and a future opportunity. In practice, that can look like a need or desire to hire new staff, invest in new stock or open a new site.
While late payments will certainly complicate those plans, creating tougher laws around this problem is not a silver bullet given the other aforementioned factors at play.
Indeed, focusing on the solutions – not the problems – is key here. Tighter regulation to protect the interests of SMEs is one such solutions; a policy agenda and tax framework that champions the interests of small businesses is more important still.
Access to finance needs to be in the spotlight
One solution less spoken about, however, is access to finance. It is an area that must be improved through both greater access and greater education for small business leaders, opening up avenues away from the traditional banks, which have withdrawn from the SME lending space over the past decade.
In fact, analysis of UK Finance data has shown that high street bank lending to SMEs across Great Britain fell by £26.8 billion, or 30%, between the start of 2022 and the end of 2025.
Without the readily available support of the big banks, it can be challenging for SMEs, and even some brokers, to know where to turn for business finance. The British Business Bank’s research has shown that challenger and specialist banks accounted for 60% of gross SME lending in 2025, so progress is clearly being made, but more can still be done to ensure SME owners and managers know what options they have.
Crucially, when we talk about their options this extends to the types of product that are available – some SMEs, such as those in the retail or hospitality sector, for instance, might find that they are better suited to revenue-based finance, like merchant cash advances, rather than traditional business loans. This is where education and broker support can shine through.
Ultimately, statements about SMEs being the “lifeblood” of the UK economy are too readily thrown around. What matters now, amidst a complex and challenging economic backdrop, is for SMEs to know that they have both public and private sector support. Support that will ensure they can navigate the common cashflow issues they encounter, but also receive backing that enables them to seize opportunities and scale with confidence.
The Small Business Protections Bill is a great chance not only to address a big problem for SMEs but also to put small businesses and their best interests back in the limelight.
Chris Thorne is the Chief Commercial Officer at 365 Finance. 365 Finance believes in helping small and medium enterprises (SMEs) succeed. Its revenue-based funding options are built to provide SMEs with fast, flexible finance that’s right for their business. The payment terms are flexible enough to meet their cash requirements, so they can grow their business without constraining yourself with tight repayment periods.
