Picture of someone's hands with a late invoice as part of the UK's Commercial Payments Bill

The late show: WBS research finds the UK's Commercial Payments Bill is more comprehensive than any other countries'

Small businesses across the UK are set to benefit from the strongest commercial payment regulations of any major economy.

A new report conducted by Warwick Business School's Enterprise Research Centre (ERC) confirms the UK's landmark legislation goes further than comparable frameworks in the G7, EU, and beyond.

The research, commissioned by the Department for Business and Trade, compares payment laws across 20 jurisdictions.

It finds that the UK's Commercial Payments Bill - combining a mandatory 60-day payment cap, non-waivable interest, and an empowered Small Business Commissioner - is more comprehensive than any existing international framework.

The research identifies two international models that have achieved sustained improvement: Japan, where proactive Government enforcement cut late payment incidence from 25 to 12 per cent over 18 years; and the Netherlands, which has the lowest rate of late payment difficulties in the EU - just 31 per cent of companies affected - under a law that caps payment terms at 30 days when large companies pay small suppliers. Both models support the design choices in the UK's new legislation.

But critically, the research finds that transparency and voluntary approaches alone consistently fail to secure prompt payments for small and medium-sized enterprises (SMEs).

Where countries rely solely on civil courts, small firms routinely suppress their own claims to protect commercial relationships - a pattern seen in the UK, the EU, and Australia alike. Meanwhile, the US has sector-specific regulation but no general business-to-business payment framework.

The report concludes that only mandatory caps backed by proactive enforcement change behaviour at scale, supporting the UK’s chosen framework design.

The authors of the report, Mark Hart, Professor of Entrepreneurship and Enterprise and Deputy Director of the ERC, and Rita Nana-Cheraa, Research Fellow at WBS, said: “The central challenge - for all jurisdictions reviewed - is identical: the gap between de jure rights and de facto enforcement, amplified by SME relationship dependency.

“The UK's proposed combination of mandatory interest, accessible adjudication, proactive Serious Breach of Contract (SBC) investigation, and financial penalties is the most structurally coherent attempt globally to close this gap.”

Blair McDougall MP, Minister for Small Business and Economic Transformation, said: “Far too many small business owners tell me they lie awake worrying about how they’ll pay staff or cover bills, simply because they haven’t been paid on time for work already delivered.

“This research proves that the Small Business Protection Bill will change that - tackling unfair power imbalances and restoring certainty for SMEs and the self-employed, so they can focus on what they do best: growing their businesses and driving our economy forward.”

Emma Jones, Small Business Commissioner, said: “This research shows the UK is working to pass legislation that would herald the world’s fairest payment terms and times.

“This comes not a moment too soon as small businesses look to free up time and cash to go for growth. We have also brought together international policymakers and stakeholders to update on UK progress and consider the potential for other countries to follow suit.

A global SME payment standard

“Doing so could see a move to a single international SME payment standard that would make life easier for large corporates buying from SME suppliers and small firms themselves.”

Professor Hart added: “In this comprehensive global audit, we conclude that the proposed UK legislative package for 2025–2026 is an 'architecturally complete' framework that directly incorporates several international 'gold standards' to address the structural power imbalances inherent in late payments.

“Our work provides rigorous international evidence for the UK Government by identifying key benchmarks - from Japan’s proactive enforcement and the Netherlands' precisely targeted two-tier legislative structure, to Ontario’s rapid adjudication - that are essential for ensuring the proposed legal framework will transform the UK’s payment landscape and underpin SME growth and productivity.”

See the full report here: Late Payment: International Comparative Legal & Regulatory Framework.

Further reading:

How can small businesses achieve net zero?

The key leadership skills for small business growth

Why did late payment cut through at the UK election?

Will the Government's Small Business Plan deliver for SMEs?

 

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