Small businesses across the UK are set to benefit from the most comprehensive support package in a generation, as the government launches a bold new plan to empower them to thrive and drive economic growth, forming a central part of its ‘Plan for Change’.
Small and medium-sized firms are the backbone of the British economy, employing 60% of the country’s workforce and generating a staggering £2.8 trillion in turnover. However, for too long, many have faced an uphill battle, held back by late payments and a lack of access to crucial financial backing within a system that has not always worked in their favour.
From tradespeople and shopkeepers to start-up founders and family-run firms, countless hardworking businesses have struggled despite their efforts. Recognising this, the Government is now taking decisive action to support small businesses and provide them with the tools they need to grow. This initiative builds upon the solid foundation of certainty and stability already delivered by this government, including new trade deals, four interest rate cuts, and a long-term industrial and trade strategy designed to help businesses plan ahead with confidence.
At the core of this new plan is the most significant package of reforms in a generation aimed at tackling late payments, with proposals to introduce the toughest laws on late payments among G7 nations.
Late payments represent one of the biggest impediments to small business growth, causing severe cashflow problems that prevent firms from scaling up and investing in their future. Every day, diligent businesses are forced to close their doors simply because they are not paid on time.
The new legislation is set to grant stronger powers to the Small Business Commissioner, empowering them to impose fines, potentially worth millions of pounds, against larger firms who persistently delay payments to their suppliers. The Small Business Commissioner will also gain new authority to carry out spot checks and enforce a strict 30-day invoice verification period, designed to significantly speed up dispute resolutions. The forthcoming legislation will further introduce maximum payment terms of 60 days, which will subsequently be reduced to 45 days, providing small firms with vital certainty that they will be paid promptly.
Under the new proposals, audit committees will be legally required to scrutinise payment practices at board level. This will place greater pressure on large firms to demonstrate fair treatment of small suppliers, backed by mandatory interest charges for those who fail to pay on time. These changes are also expected to save small businesses invaluable time, freeing up hours currently spent chasing overdue invoices so they can instead focus on growing their operations. Collectively, these measures aim to ensure businesses are paid on time and eradicate the scourge of late payments, which currently costs the UK economy an estimated £11 billion per year and leads to the closure of 38 UK businesses every single day.
Prime Minister Keir Starmer said: “From builders and electricians to freelance designers and manufacturers—too many hardworking people are being forced to spend precious hours chasing payments instead of doing what they do best – growing their businesses. It’s unfair, it’s exhausting, and it’s holding Britain back. So, our message is clear: it’s time to pay up. Through our Small Business Plan, we’re not only tackling the scourge of late payments once and for all, but we’re giving small business owners the backing and stability they need for their business to thrive, driving growth across the country through our Plan for Change.”
Business and Trade Secretary Jonathan Reynolds said: “This country is home to some of the brightest entrepreneurs and innovative businesses in the world, and we want to unleash their full potential by giving them back time and money to do what they do best – growing our local economies. Our Small Business plan – the first in over a decade – is slashing unnecessary admin costs, making it easier for businesses to set up shop and giving SMEs the financial backing they need. This is our Plan for Change in action, putting more money in people’s pockets, boosting local communities and ensuring Britain is a great place to do business and thrive.”
Small Business Minister Gareth Thomas said: “I want the UK to be the best place in the world to start a business, grow and succeed – and that’s why we’ve taken bold steps today. Too many small firms go under each year because they aren’t paid on time – that is completely unacceptable. I hear all too often about businesses who just don’t have the cash needed to start up or grow. Today, we’ve announced measures as part of our Plan for Change to tackle all of those issues and beyond. This is the government listening to businesses, working with them, and delivering real change.”
Policy Chair of the Federation of Small Businesses (FSB), Tina McKenzie, said: “Making sure businesses are paid on time, that our high streets thrive, and creating conditions in which everyone can start and succeed in business are crucial priorities for small businesses, communities and the economy. It’s very welcome that the Prime Minister has today made them his Government’s priorities. I’m pleased that FSB and the Government have been able to work in lockstep on the bold and ambitious measures needed to tackle the scourge of late payment through legislation, and other pro-growth, pro-small business measures. Today’s plan is an encouraging commitment from the Government to take the side of small businesses in the great growth challenge ahead.”
Charlie Shaw, owner of Flock and Herd butchers in Peckham, said: “We’re proud to pay every supplier on time and once we receive an invoice, so it’s fantastic to see the government put the Small Business Plan into place tackling the big issue of late payments. We believe this is a fair and honest way to conduct business. It gives us a clear and current understanding of how our business is performing. Our relationships with our suppliers have been amazing and truly beneficial to all parties.”
As part of this comprehensive plan, the government is also tackling another major barrier for small businesses: access to finance. Despite the UK’s world-leading financial services sector, many small firms frequently struggle to secure the funding needed to invest, expand, or even survive.
To address this, the Government is launching a new £4 billion wave of financial support aimed at boosting growth and assisting more small businesses in starting up and expanding. This includes a £1 billion boost for new businesses, providing 69,000 Start-Up Loans and crucial mentoring support to inspire the next generation of entrepreneurs and small business owners. The Government is also going further by delivering a new £3 billion boost to the British Business Bank, raising its total guarantee to £5 billion, to help lenders offer more small business loans through the ‘ENABLE programme’. Under this scheme, the BBB provides a government-backed guarantee to help lenders feel more secure when lending to smaller or newer businesses, enabling them to offer better loan terms, including lower interest rates.
These measures aim to dismantle long-standing barriers that have made it harder for small businesses to access the funding required to get off the ground, by making finance and loans more accessible, affordable, and fair. Accelerating SME growth by just one percentage point per year could deliver an additional £320 billion to the UK economy by 2030. All of these measures announced today are designed to support small businesses to the hilt and build upon actions already taken by this government to create optimal conditions for businesses to thrive, including:
- Slashing red tape to boost the hospitality and arts sector through hospitality zones and licensing reforms, following the Licensing Taskforce co-chaired with Nick Mackenzie, Greene King CEO.
- Introducing High Street Rental Auctions to fill vacant high street premises.
- Revamping the Board of Trade to encourage more small firms to export globally.
- Launching the new Business Growth Service to ensure SMEs have access to key support.
- Committing to permanently lower business rates multipliers for the hard-hit retail, hospitality, and leisure sectors.
