Commercial Payments Bill moves to the Commons with retentions ban included, CLC says

The Commercial Payments Bill has completed its passage through the House of Lords and moved to the House of Commons on 21 October for further scrutiny, the Construction Leadership Council (CLC) said on 2 November.

The Bill would set maximum payment terms of 60 days, make statutory interest on late payments mandatory and give the Small Business Commissioner stronger powers to tackle poor payment practices, according to the CLC. It would also prohibit the deduction and withholding of retention sums under construction contracts.

Most of the measures will come into force after Royal Assent, the CLC said, to give businesses time to prepare and allow the necessary secondary legislation to be developed.

Brian Berry, Chief Executive of the Federation of Master Builders (FMB), said: "The proposed ban on withholding retention payments in construction is especially significant for our members." He said too many SMEs are kept waiting by major contractors who treat long payment terms as standard practice.

What the Bill does

The Department for Business and Trade's factsheet says the 60-day cap on payment terms carries strictly limited exemptions and that interest on late payments would be mandated at 8% above the Bank of England base rate. The retentions measure is described as prohibiting the deduction and withholding of retention payments under the terms of a construction contract.

The Small Business Commissioner would be able to investigate larger businesses suspected of persistently engaging in poor payment practices and to adjudicate contractual payment disputes between small and larger businesses, the factsheet says. The Government said it would provide a lead-in time before the powers come into force, including a transition period, and that the measures would not be applied retrospectively.

In its press release, the Government said the 60-day cap applies to all large firms paying smaller suppliers and that potential fines for the worst offenders could be worth tens of millions. The Bill builds on the 1998 Late Payment of Commercial Debt Act, it said.

The Office of the Small Business Commissioner said the Bill, introduced to Parliament on 19 May 2026, would let it levy financial penalties on businesses that persistently pay suppliers late and adjudicate payment disputes outside the court process. Emma Jones CBE, the Small Business Commissioner, said founders spend over 86 hours chasing overdue invoices.

The case for reform

The Government estimates late payments cost the UK economy £11bn a year and see 38 UK businesses close every day. Peter Kyle, Business Secretary, said late payments choke growth and cost jobs.

The public consultation on tackling poor payment practices ran from 31 July 2025 to 23 October 2025 and received 867 responses, according to the Department for Business and Trade. The Building Engineering Services Association (BESA) said a large proportion of the responses came from the construction and engineering services sector.

Paul Beeston, CLC Industry Sponsor for Business Model Reform and Head of Industry and Service Insight at RLB, cited in an RLB article a government consultation estimate that £229m of retention funds, in 2015 prices, is lost to insolvency each year. He argued that retentions can encourage the whole project team, from clients and advisers to contractors and sub-contractors, to get things nearly right.

"The Commercial Payments Bill is a legislative nudge in a better direction," Beeston said.

Industry response

BESA said implementation of the retentions ban is likely to take up to two years. David Frise, its Chief Executive, said the Government had listened to the concerns of its members and the wider industry, while Debbie Petford, BESA's Legal and Commercial Director, said too many businesses had struggled or failed because they were denied healthy cashflow.

The Civil Engineering Contractors Association (CECA), in Budget 2026 evidence dated 9 September 2026, called for speedy passage and implementation of the Bill and specifically backed the prohibition of construction retentions.

Blair McDougall, Minister for Small Business and Economic Transformation, said introducing the Bill was about restoring fairness, dignity and security for small business owners and the self-employed.

What happens next

The CLC said construction businesses will need to consider how the requirements apply across their contractual arrangements, both construction contracts as defined in the legislation and other commercial contracts.

The council plans to work with the Department for Business, Innovation, Science and Trade, as the CLC names it, and a broad range of industry stakeholders to develop further guidance on the reforms.

The Bill now awaits further scrutiny in the House of Commons, having moved there on 21 October, according to the CLC.