Small businesses are set to benefit from what researchers describe as the strongest late payment laws of any major economy under new UK legislation.
Research by the Enterprise Research Centre found the UK's Commercial Payments Bill goes further than existing frameworks across the G7, the European Union and other major economies.
The Bill introduces a 60-day payment cap, mandatory interest on overdue invoices and enhanced powers for the Small Business Commissioner.
The reforms are designed to tackle the estimated £26 billion in overdue invoices owed to UK small businesses at any given time.
Commissioned by the Department for Business and Trade, the research compared payment laws across 20 countries and concluded that voluntary measures alone have failed to solve the problem of late payments.
It also highlighted successful international examples, including Japan, where enforcement measures cut late payment rates from 25% to 12% over 18 years, and the Netherlands, which has some of the lowest late payment levels in Europe.
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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."
Professor Mark Hart, deputy director of the Enterprise Research Centre at Warwick Business School, said: "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."
