Late payment costs the UK economy £11 billion a year, and 38 businesses close every day because of it. That's the scale of the problem three separate government reforms are now trying to solve at once.
Causeway recently ran a webinar looking at what's changing in construction payments, featuring senior voices from government and the Office of the Small Business Commissioner.
Featuring:
- Emma Jones, Small Business Commissioner, Department for Business and Trade
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Fergus Harradence, Deputy Director, Infrastructure & Construction, Department for Business and Trade
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Tim Cole, Industry Director, Trading, Causeway Technologies
In this article, we summarise the key points covered: how three separate reforms are converging on one outcome, why the case for change is now hard to argue with, and what construction leaders should be doing today to get ready.
If you'd like the full discussion, including the live audience questions on the Procurement Act and payment reporting, you can watch the webinar OnDemand here.
Three reforms, one direction of travel
The Fair Payment Code, the Commercial Payments Bill and the e-Invoicing mandate are often discussed separately, but they're pulling in the same direction: getting money moving faster through the economy.
The Code currently runs on a voluntary basis, with three tiers. Gold, the top tier, means 95% of invoices are paid within 30 days. Once the Commercial Payments Bill becomes law, its bronze tier becomes the statutory floor for every business, backed by a new maximum 60-day payment term. Any contract term written to get around that will simply be void.
"There is no contractual route around the law."
Fergus Harradence, Deputy Director, Infrastructure & Construction, Department for Business and Trade
The Bill had its first reading in the House of Lords on 19 May this year. It completed report stage before its third reading in October. From there it moves to the House of Commons, with Royal Assent targeted for the first quarter of 2027. Most of the new powers and requirements are expected to come into force across 2027 and 2028. e-Invoicing then becomes mandatory in 2029, reinforcing the same prompt-payment agenda from a different angle.
The case for change, in numbers
The scale of the problem is why government moved so quickly. Alongside the £11 billion annual cost and the 38 business closures a day, a small business owner spends an average of 86 hours a year chasing money they're owed.
Behind those figures are real people. Casework teams at the Office of the Small Business Commissioner regularly hear from business owners who've already delivered the work and are still waiting to be paid for it.
"I've read emails from businesses who've written into us and said, I cannot pay my mortgage if these payments aren't made."
Emma Jones, Small Business Commissioner
From self-referral to proactive enforcement
Since the Office of the Small Business Commissioner was created in 2017, it's relied almost entirely on small businesses reporting bad payment behaviour themselves. Understandably, many don't. Raising a complaint about a client who owes you money isn't a comfortable position to be in, especially when that client is also your biggest customer.
The Commercial Payments Bill changes that balance. The Commissioner will gain the ability to act on anonymous information, rather than needing to name the small business when contacting a large company about a late payment.
"Going forward, we will be able to act on anonymous information."
Emma Jones, Small Business Commissioner
Construction is already the largest sector represented on the Fair Payment Code, and the webinar's panel pointed to examples of large firms actively championing better payment behaviour as a genuine competitive advantage: fewer supplier complaints, a smaller accounts payable headcount, and stronger positioning in public sector bids that increasingly weigh up payment practices.
Is your payment system already compliant?
Much of the sector is already in reasonable shape. Build UK data shows the average time to pay for large construction firms is now under 40 days, well within the new statutory maximum. But that's not true everywhere, and some firms still batch invoices into monthly payment runs in a way that could tip into late payment under the new rules.
The advice from government is simple: check your own systems now, rather than waiting for the legislation to force your hand.
"Look at their own internal systems and processes for receiving invoices and making payments, and see whether or not they're likely to be able to meet the requirements of the legislation."
Fergus Harradence, Deputy Director, Infrastructure & Construction
Payment reform also sits inside a wider construction productivity push. Government plans to publish a specification guiding supply chain productivity on 9 November, alongside ongoing work on digital payment systems and digital design and construction management technologies.
Key takeaways
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The Fair Payment Code's bronze tier becomes statutory law once the Commercial Payments Bill takes effect, with a maximum 60-day payment term that contracts can't override.
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Late payment costs the UK economy£11 billion a year and closes an estimated 38 businesses a day.
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Small business owners spend an average of 86 hours a year chasing payments they're owed.
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The Small Business Commissioner will gain new powers to act on anonymous reports, rather than relying solely on businesses to self-report bad payers.
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The Bill is on track to clear Parliament by early 2027, with most new requirements phasing in across 2027 and 2028.
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e-Invoicing becomes mandatory in the UK from 2029, reinforcing the same prompt-payment agenda.
What happens between now and Royal Assent
The Bill still has to clear the House of Commons before Royal Assent, expected in the first quarter of 2027. Government has also signalled a possible future reduction to a 45-day cap. That review won't happen for at least five years, giving businesses time to adjust to the 60-day limit first.
See the full exchange on how project bank accounts compare with digital payment platforms, and the live audience questions on the Procurement Act and payment reporting twice-yearly rules. Watch the full webinar recording OnDemand here.
Check out our resources hub which has all you need to know about the upcoming e-Invoicing mandate.
The Commercial Payments Bill is progressing through Parliament, with Royal Assent targeted for the first quarter of 2027. Most of the new requirements, including the 60-day cap, are expected to come into force across 2027 and 2028.
The Fair Payment Code is a voluntary scheme with three tiers, bronze, silver and gold. Once the Commercial Payments Bill becomes law, the bronze tier becomes a statutory minimum that every business has to meet, rather than an opt-in commitment.
The e-Invoicing mandate is set to come into effect in 2029, alongside the wider push to get money moving faster through the economy.
No. Government doesn't plan to require project bank accounts, and expects the trend to keep moving toward digitised payment platforms instead, which offer wider coverage and better auditing across the supply chain.
No. The Government has confirmed that real-time reporting (sometimes referred to as e-Reporting or Continuous Transaction Controls) is not part of the April 2029 mandate. However, businesses should remain aware that reporting requirements could evolve in the future.
Businesses should begin by reviewing their current invoice processes, assessing system readiness, improving invoice data quality and engaging suppliers early. The organisations that treat e-Invoicing as a business transformation initiative rather than a compliance project are likely to realise the greatest benefits.
No. One of the key benefits of the Peppol framework is interoperability. Organisations can use different compliant service providers and still exchange invoices through the network.
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