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UK government commences crackdown on late payment crisis

Tuesday, August 19, 2025 — 16:24:58 (UTC)

London, 19 August 2025 – As the Prime Minister announces a crackdown on persistent late payers, a study highlights that half of all supplier invoices are paid late, costing the UK economy £11bn annually and contributing to the closure of 38 businesses every day. Sir Keir Starmer’s declaration that “it’s time to pay up” underscores the scale of the problem and the urgent need for businesses to address delays across their supply chains.

According to Basware’s Accounts Payable Benchmark Report, delayed payments cost individual enterprises an average of $45 million per year in supply chain disruptions, while also damaging supplier relationships and undermining ethical business practices.

In its study, Basware analysed ‘on-time payment rates’: the percentage of supplier invoices that are paid on or before the invoice due date. Basware’s study identifies two key drivers behind late payments. First, inefficient processes—such as paper-based invoicing, manual approvals, and errors—cause costly delays. Second, cash flow challenges lead many businesses to deliberately stretch working capital, choosing to pay suppliers late.

Both practices add financial strain across supply chains, compounding inflationary pressures and increasing the risk of supplier failure. With 76% of CFOs citing inflation as their top business risk for 2024, late payments have become a direct contributor to a growing financial health crisis.

Martti Nurminen, Chief Financial Officer at Basware, commented on the challenges faced surrounding late payments: “Late payments is a 11 billion-pound problem in the UK alone, that is fueling a financial health crisis. Our research has found that half of suppliers are paid late, so the UK government is right to address this problem, and bring about greater efficiency and healthier supply chains.”

Under the new ‘Small Business Plan’, businesses will have to pay suppliers within 30 days of invoice receipt, unless alternative arrangements have been agreed. Further measures of the legislation will introduce maximum payment terms, initially set at 60 days, which will then be reduced to 45 days. This will be enforced by spot check powers given to the small business commissioner, ensuring payment deadlines are not breached.

Beyond the immediate financial strain, Nurminen also stresses that late payments have ethical consequences that ripple through the supply chain.

“It’s not just a numbers game,” Nurminen explains. “When buyers delay payments, they are directly impacting the livelihoods of their suppliers, many of whom are smaller businesses that depend on timely cash flow to survive. Businesses need to recognize that ensuring on-time payments is both a financial necessity and moral responsibility.”

Basware’s report shows that technology can transform payment practices. On-time payment rates rise to 85% with invoice automation, processing times drop from 10.1 days to under one day, and costs fall from $16 per manual invoice to just $2.36.

Warehouse equipment manufacturer Kion demonstrates the impact of automation, cutting invoice processing time by 50% and paying 42% of invoices touchlessly, with zero manual intervention. The company now manages over 90% of its spend under preferred suppliers, improving both financial oversight and supplier relationships.

Martti Nurminen, CFO at Basware, concludes: "The technology exists to solve the late payments crisis. It's time for businesses of all sizes to step up and make on-time payments a priority. Timely payments are not solely a matter of compliance or efficiency but are a reflection of a company’s commitment to its suppliers and the broader economy. As companies adopt automation, they can better balance the pressures of managing cash flow while upholding their ethical responsibility to pay suppliers promptly.”

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Source: Company press release.

Categories: Reports and research