As part of its Small Business Plan, the Government has launched a consultation on strengthening late payment legislation, which it says will make it the toughest amongst the G7 nations. With 1.5 million businesses affected by late payments at a cost of almost £11 billion per year to the UK economy, the consultation sets out the following proposed package of legislative measures, which will impact the whole construction supply chain:

• Requiring audit committees to make recommendations on payment performance to company directors before results are published
• Introducing maximum payment terms of 60 days, which may be reduced to 45 days after five years
• Introducing a deadline of 30 days for disputing an invoice after receipt
• Making it mandatory to pay interest of 8% above the Bank of England base rate on late invoices
• Requiring large businesses to report on the payment of statutory interest
• Giving the Small Business Commissioner (SBC) powers to impose financial penalties on large businesses that consistently pay late
• Introducing additional powers for the SBC, including verifying the data submitted under the Reporting on Payment Practices and Performance Regulations
• Specific to construction, either prohibiting the use of retentions or introducing requirements for retentions to be protected in a separate bank account or through a guarantee.