Late payments have long been a persistent challenge for UK businesses – especially in construction. Now, the Government is stepping in with the biggest shake-up in decades. If you’re a contractor, this isn’t just another policy update. It’s a wake-up call.
The Government’s message is clear: pay faster - or face the consequences
In July 2025, ministers launched a consultation on a sweeping package of payment reforms. The direction of travel is obvious: tighter rules, faster payments, and real penalties for those who don’t comply.
For large contractors, especially in construction, this is no longer just a commercial issue. It’s a board-level compliance risk, with reputational and operational consequences.
What's changing?
Here’s what the consultation is proposing:
- 60-day maximum payment terms – with a possible move to 45 days down the line.
- 30-day dispute window – if you don’t raise an issue in time, statutory interest kicks in automatically.
- Mandatory statutory interest – no more opting out in contracts.
- Board-level accountability – audit committees must review payment performance, and directors will need to report on it.
- Construction-specific rules on retentions – including the potential to abolish them or require protected accounts.
And from 1 October 2025, central government buyers will expect suppliers to pay 95% of invoices within 60 days, and on average, within 45 days – down from the current 55.
Why construction will feel this the most
Construction is uniquely exposed. Complex subcontracting chains, heavy reliance on SMEs, and the widespread use of retentions all make late payment a systemic risk – not just for suppliers, but for project delivery itself.
In our recent webinar, our expert panel didn’t mince words: late payment isn’t just bad business - it’s unethical. Especially when it hits smaller firms hardest.
But they also pointed to a clear solution: stronger operational controls, starting with receipting.
Receipting: the unsung hero of faster payments
Let’s face it – most invoice disputes start with poor receipting.
When goods or services are properly receipted – with time, place, and quantities logged – and matched to the PO and invoice, disputes become the exception, not the rule.
That means:
- Fewer errors
- Faster approvals
- Stronger compliance
Think of receipting like a safety check. Standardise the data, make it easy to capture on site, and wire it straight into your AP systems. That’s how you make the 30-day dispute window not just manageable – but auditable.
E-invoicing isn’t mandatory (yet) – but it’s coming
The Government has also consulted on e-invoicing – and while it’s not mandatory yet, it might be soon.
Even if it isn’t, your adoption will be under the spotlight. Payment practice reporting already asks whether you use digital invoicing. Boards, auditors, and buyers will see this as a signal of how seriously you take payment performance.
What you should be doing now
This isn’t just a finance issue - it’s a governance one. Here’s how to get ahead:
- Set a formal group payment policy with a 60-day cap, a 30-day dispute SLA, and a roadmap to 45 days.
- Report to the board on statutory interest accruals, invoice timing, and dispute volumes.
- Fix the bottlenecks – poor PO quality, inconsistent receipting, and slow supplier onboarding.
- Model your exposure to retentions – if they’re abolished or locked in protected accounts, what happens to your cash flow, contracts, and supplier relationships?
And if you work on public sector contracts, don’t wait for October. Start applying the 45-day average test now.
Have your say before it’s too late
The consultation closes on 23 October 2025. If you’ve got data – on disputes, receipting, or retentions – now’s the time to speak up.
Don’t just adapt to the changes. Help shape them.
