"Too many SMEs are kept waiting by major contractors who treat long payment terms as standard business practice," Federation of Master Builders chief executive Brian Berry said when ministers first set out the plan in March. Plenty of firms across the North will know exactly what he means. From family engineering shops to subcontractors on big civils jobs, late payment is often the quiet drain that turns a decent order book into a cashflow headache. Against that background, the Small Business Protections Bill, introduced to Parliament on Tuesday 19 May 2026, is being pitched as the biggest shake-up of payment rules in more than 25 years. (gov.uk) The Bill would cap payment terms at 60 days where large firms buy from smaller suppliers, make statutory interest on late invoices automatic and give the Small Business Commissioner stronger powers to investigate poor practice, settle disputes and fine repeat offenders. Ministers say the aim is simple enough: stop smaller firms acting as unwilling lenders to much bigger customers. (gov.uk)

For northern SMEs, this is not a Westminster talking point. Government research says late payments cost the UK economy almost £11 billion a year, with 14,000 businesses closing annually as a result - around 38 a day. The same work found that more than 1.5 million businesses, or 28 per cent of the total, are affected each year, with about £26 billion tied up in overdue invoices at any one time. (gov.uk) There is the time cost as well as the money. Businesses hit by late payment spend an average of 86 hours a year chasing what they are already owed, adding up to 133 million staff hours across the economy. Anyone running a small firm in Hull, Burnley or Barnsley will recognise that trade-off: time spent prodding a customer for payment is time not spent quoting, hiring or getting the next job out of the door. (gov.uk)

The legal changes go wider than the headline 60-day limit. The government’s consultation response said the commissioner will be able to launch investigations using a broader range of evidence, compel companies to hand over information, adjudicate payment disputes outside court and fine businesses that persistently pay late or ignore the rules. Large companies with poor records would also face board- or audit committee-level scrutiny, with commentary published on GOV.UK explaining why performance is weak and what they are doing about it. (gov.uk) There is some fine print still to come. Ministers have already said the 60-day rule will come with tightly limited exemptions, and that separate work is needed to make sure any new dispute deadline fits with the way construction contracts already handle payment notices. So while the direction of travel is clear, businesses will still want to see the detail before calling the job done. (gov.uk)

That matters especially in regions where small and medium-sized firms do a huge share of the heavy lifting. The North East Chamber of Commerce said last summer that SMEs make up 99.9 per cent of the region’s business base and employ more than one million people. Greater Manchester Chamber, meanwhile, made the point that smaller firms too often end up "involuntarily financing larger ones" when invoices are dragged out. (necc.co.uk) That reading will ring true across the North. A precision manufacturer waiting 90 days to be paid by a national customer, or a family contractor carrying wage and materials costs while cash sits upstream, is not being asked for patience; it is being asked to bankroll somebody else’s balance sheet. This Bill is an attempt to stop that becoming normal business practice. (gov.uk)

The construction measures deserve close attention in their own right. Alongside the late-payment cap and automatic interest, the Bill takes aim at retentions by moving to ban the practice of withholding retention payments under construction contracts. That will be watched closely by northern builders and specialist subcontractors, because retentions have long been one of the sore points in the sector’s payment chain. (gov.uk) Berry said in March that the proposed ban was especially significant for small builders. Fresh FMB survey findings underline why the sector wants movement: 57 per cent of firms said invoices were paid within agreed terms, but 29 per cent still reported variable payment times and 13 per cent said late payment was frequent. (fmb.org.uk)

Politically, Labour is casting the package as a test of whether government can do something practical for the country’s smaller employers rather than simply talk about them. Keir Starmer said the pain of late payment is personal when it leaves owners wondering how to pay staff, keep the lights on or invest. Business Secretary Peter Kyle has described the present system as a drag on growth worth £11 billion a year, while FSB policy chair Tina McKenzie said tougher rules and audit committee oversight could help shift payment culture. (gov.uk) There is at least some evidence that sharper enforcement can have an effect. The Office of the Small Business Commissioner said on 1 April 2026 that it had recovered more than £1.5 million for small businesses in the 2025-26 financial year, the best figure in over five years. The Bill is meant to turn that kind of case-by-case intervention into something with far more bite. (smallbusinesscommissioner.gov.uk)

The next step is parliamentary time. The government said the Bill was due to be introduced in the House of Lords on Tuesday 19 May 2026, with further primary and secondary legislation, plus guidance, still needed before the full package can take effect. Ministers have also said they will work with devolved governments and the Construction Leadership Council as the measures are put into law. (gov.uk) For firms across Northern England, the test will be whether this moves quickly from promise to practice. Late payment is rarely dramatic enough to make national headlines until a business folds, a payroll gets squeezed or an owner gives up. That is why this Bill will land so directly with manufacturers, contractors, freelancers and family firms well beyond London: it goes to the simple question of whether being paid on time is a rule, or just a hope. (gov.uk)