Designed to protect small businesses – but what about the squeezed middle?
The government has released its response to the consultation on late payment from 2025. Its proposed reforms include maximum payment terms, mandatory statutory interest, enhanced reporting scrutiny and strengthened enforcement powers. These all represent a serious attempt to address this long-standing issue in the UK economy and are positive steps. But as we focus on protecting small suppliers, we need to ask a question: who supports the mid-sized businesses caught in the middle?
The pressure doesn’t just disappear – it moves
Mid-market businesses (typically turning over £15–£150m) often sit in an exposed position within the supply chain. They supply large corporates with stronger negotiating leverage while also managing hundreds of smaller suppliers.
If reforms require businesses to pay suppliers within 60 days, the margin for error in collections shrinks significantly. Delays caused by disputes, fragmented credit control processes or weak visibility over aged debt can quickly create a working capital gap — even where payment terms appear aligned.
Mandatory statutory interest
In theory, mandatory interest introduces a clearer incentive (although penalties for late payment due currently exist). However, it could also potentially damage relationships (particularly in sectors like manufacturing or recruitment, where delays and reconciliations can occur). Boards will need to consider how statutory interest impacts customer retention and long-term partnerships.
Reporting moves to the boardroom
One of the most underappreciated shifts in the reform package is the increased scrutiny at audit committee and board level. It moves payment performance away from simply being a finance KPI to a governance issue.
Audit committees want assurance that:
Payment reporting data reflects operational reality
Dispute processes are structured and defensible
DSO aligns with stated payment terms
Statutory interest exposure has been modelled
Working capital assumptions are robust
In many mid-sized organisations, reporting may be technically compliant but not operationally aligned to the tighter standards reform implies.
In our experience of working with mid-market finance leaders, late payment is rarely about intent.
More often, it is the result of:
Fragmented processes
Under-resourced credit control
Poor dispute visibility
Lack of board-level attention to payment performance
The real opportunity
There is an opportunity here for businesses to become more resilient by:
Aligning payment terms across their supply chain
Reducing DSO structurally
Strengthening dispute resolution processes
Modelling statutory interest exposure
Elevating payment performance into board reporting
While the consultation outcomes are pending, we’re helping clients reinforce their working capital governance, so they don’t become the squeezed middle. If you’re unsure of your position, download our Late Payment Reforms checklist.
“Late payment reform will shine a light on payment performance – but for many mid-market businesses it may also expose weaknesses in working capital management that have been quietly building for years.”
Glen morgan, ceo
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