For too long, small and medium sized businesses in our sector have carried the hidden cost of late payments.

The uncertainty it creates can stall projects, strain cash flow, and distract from the very work these companies were brought in to do. Today’s announcement from Government, described as the "toughest measures on late payments in over 25 years", is a welcome step toward addressing this longstanding challenge. 

Among the most important changes is the abolition of unfair retention clauses in construction contracts. For many smaller firms, retentions have tied up money that is vital to keep businesses running, shifting risk onto those least able to absorb it. Removing these clauses is not just a regulatory adjustment; it is a practical change that should improve cash flow, strengthen supply chains, and allow SMEs to focus on delivering high quality work rather than chasing payments. It is a move that benefits the entire sector, creating a fairer and more sustainable industry. 

The package of reforms, limiting payment terms, introducing a 30 day cap on invoice disputes, enforcing statutory interest, and strengthening the powers of the Small Business Commissioner, signals a clear message: paying on time is expected, and late payment is no longer acceptable. For SMEs, this provides reassurance that their work is valued and that the system supports them, rather than putting them at a disadvantage. 

These measures alone will not resolve every challenge. Real change will come from a combination of practical guidance, proportionate enforcement, and leadership across boards and audit committees. But by removing retentions and tackling entrenched late payment practices, the Government has taken a meaningful step toward creating an environment where SMEs can thrive. 

ACE will continue to work with government and industry partners to ensure these reforms are implemented in ways that are practical, proportionate, and beneficial to smaller businesses. This is a chance to make fair payment the norm, to reduce unnecessary risk, and to allow SMEs to focus on what they do best, building the infrastructure and solutions that support our economy and communities. 

To read the announcement, click here