From April 1, companies bidding for public projects worth over £5m must settle invoices within a 55 day payment deadline or face a work ban
Announced as part of the Autumn Statement, the 55 day payment deadline requires firms to demonstrate that they are paying 95% of their invoices within 60 days and are paying their invoices within an average of 55 days.
The average will decrease to 45 days in April 2025 and 30 days in the following years.
Late payments bolster SME cashflow
Speaking previously on the challenges facing SME supply chain players, Hunt said: “One of the key challenges facing SMEs is the cashflow implications of late payments, which hold small businesses back from investing and innovating. […] The government will lead by example in introducing more stringent payment-time requirements for firms bidding for large government contracts.”
Reporting on retention payments will be introduced in the near future
Alongside this new stricter payment rule, proposals to introduce reporting on retention payments were also announced.
For retentions, this entails that main contractors and clients must report:
• The average duration for making retention payments post practical completion and end of contractual defects liability period;
• The proportion of retention payments made within the reporting period: within 30 days, between 31 and 60 days, and exceeding 61 days;
• The percentage of retention payments overdue within the reporting period compared to the agreed payment timeframe; and
• The mean value of retention held per construction contract (% of contract value).
These proposals will not come into effect until April 2025.
