Source: https://scanmarket.unit4.com/strategic-sourcing/supplier-risk-performance-management
I’ve been managing supplier relationships and working capital for over 28 years, and the proposed legislation mandating 60-day maximum payment terms represents the most significant intervention in B2B payment practices I’ve witnessed. UK government to force maximum payment terms for suppliers to 60 days through new regulations targeting large businesses that currently stretch payments to 90-120 days, creating cash flow crises for smaller suppliers.
The reality is that late payment culture has become endemic in UK business, with average payment terms extending from 45 days in 2010 to 68 days currently despite contractual terms typically specifying 30-60 days. I’ve watched suppliers go bankrupt not because their businesses failed but because customers withheld payment for months, using suppliers as involuntary lenders.
What strikes me most is that UK government to force maximum payment terms for suppliers to 60 days addresses a market failure where large buyers exploit bargaining power to improve their working capital at suppliers’ expense. From my perspective, this represents overdue correction of imbalanced commercial relationships that have destroyed thousands of viable small businesses through manufactured cash flow crises.
Large Buyer Working Capital Strategies Face Disruption
From a practical standpoint, UK government to force maximum payment terms for suppliers to 60 days will fundamentally disrupt how major corporations manage working capital because many currently operate with 90-120 day payment cycles that artificially inflate cash positions. I remember advising a FTSE 250 company whose CFO proudly explained how extending supplier terms from 60 to 90 days generated £45 million in additional cash without any operational improvement.
The reality is that large businesses have systematically extended payment terms over the past 15 years to improve their own cash conversion cycles at suppliers’ expense. What I’ve learned through managing both sides of these relationships is that what appears as working capital efficiency for buyers represents working capital crisis for suppliers who must fund extended receivables.
Here’s what actually happens: major retailers and manufacturers unilaterally inform suppliers that payment terms are changing from 60 to 90 days, knowing suppliers lack alternatives because losing major customer accounts threatens viability. UK government to force maximum payment terms for suppliers to 60 days through legislation eliminating this coercive bargaining power imbalance.
The data tells us that UK businesses carry £23.4 billion in overdue invoices, with SMEs particularly affected by larger customers delaying payment. From my experience, companies that built financial strategies around extended supplier payment terms will face genuine adjustment challenges requiring alternative working capital funding.
SME Cash Flow Relief Creates Growth Opportunities
Look, the bottom line is that UK government to force maximum payment terms for suppliers to 60 days will inject approximately £2.5-3.5 billion in working capital back into SME suppliers who currently finance extended customer payment cycles. I once managed a manufacturing business whose largest customer extended terms from 60 to 120 days, forcing us to secure expensive invoice financing just to meet payroll while waiting for payment.
What I’ve seen play out repeatedly is that SMEs with strong order books and good margins still fail because they can’t finance the working capital gap between paying their costs and receiving customer payments. UK government to force maximum payment terms for suppliers to 60 days addresses this fundamental viability threat that has nothing to do with business model quality.
The reality is that reducing average payment days from 68 to 60 may seem modest, but for businesses operating on tight cash flow, those eight days represent meaningful liquidity. From a practical standpoint, MBA programs teach cash conversion cycle optimization, but in practice, I’ve found that small businesses have zero negotiating power to enforce contracted payment terms against major customers.
During previous late payment crises, smart suppliers built customer concentration limits and required deposits, but competitive pressures often forced accepting unfavorable terms. UK government to force maximum payment terms for suppliers to 60 days levels the playing field legislatively when market forces alone proved insufficient.
Implementation and Enforcement Challenges Emerge
The real question isn’t whether the policy is well-intentioned, but whether enforcement mechanisms will prove effective given past failures of voluntary payment codes. UK government to force maximum payment terms for suppliers to 60 days faces implementation challenges because measuring actual payment performance versus contractual terms requires monitoring capabilities that don’t currently exist comprehensively.
I remember back in 2017 when the Prompt Payment Code launched with great fanfare, yet signatories routinely violated commitments with zero consequences. What works on paper often fails in practice when enforcement depends on suppliers reporting violations to regulators, knowing that complaints risk losing customer relationships entirely.
Here’s what nobody talks about: UK government to force maximum payment terms for suppliers to 60 days may drive creative compliance where buyers technically meet 60-day terms while imposing onerous invoice dispute processes that delay payment through administrative mechanisms rather than contractual terms. During previous regulatory interventions, I’ve watched sophisticated buyers develop workarounds maintaining delayed payment while appearing compliant.
The data tells us that current voluntary schemes show 40 percent non-compliance rates with self-reported commitments, suggesting mandatory requirements will face similar enforcement difficulties. From my experience, effective enforcement requires meaningful penalties, proactive monitoring, and protection for suppliers who report violations—all elements needing careful design.
Supply Chain Finance Solutions Gain Importance
From my perspective, UK government to force maximum payment terms for suppliers to 60 days will accelerate adoption of supply chain finance and reverse factoring programs where third-party financiers pay suppliers promptly while buyers settle on extended terms. I’ve implemented several supply chain finance programs, and they work brilliantly when structured properly, though costs must be distributed fairly.
The reality is that supply chain finance enables buyers to maintain extended payment cycles while suppliers receive immediate payment, with finance providers earning returns on the working capital gap. What I’ve learned is that these programs create value when financing costs are shared between buyers and suppliers rather than imposed entirely on suppliers through discount requirements.
UK government to force maximum payment terms for suppliers to 60 days makes supply chain finance more important because buyers seeking working capital flexibility within regulatory constraints will formalize these arrangements. During the last working capital squeeze, companies that implemented supply chain finance maintained supplier relationships while optimizing their own cash positions.
From a practical standpoint, the 80/20 rule applies here—20 percent of suppliers account for 80 percent of payment value, making targeted supply chain finance programs economically viable for key relationships. UK government to force maximum payment terms for suppliers to 60 days will drive innovation in how these programs get structured and implemented at scale.
Industry-Specific Exemptions Face Lobbying Pressure
Here’s what I’ve learned through decades navigating policy changes: UK government to force maximum payment terms for suppliers to 60 days will face intense lobbying for industry-specific exemptions from sectors claiming unique circumstances justify extended payment terms. I remember when construction industry representatives argued that project-based payment structures required 120-day terms despite evidence that shorter cycles worked in other countries.
The reality is that every industry believes it deserves special treatment, but granting broad exemptions would undermine the policy’s effectiveness. What I’ve seen is that sectors claiming extended terms are essential often adapt quickly once requirements become mandatory, discovering that 60-day terms prove workable despite prior assertions otherwise.
UK government to force maximum payment terms for suppliers to 60 days must resist exemption pressure because once certain sectors receive special treatment, the principle collapses and effectiveness diminishes. During previous regulatory implementations, exemptions granted during lobbying periods created loopholes that ultimately negated intended benefits.
The data tells us that construction, retail, and automotive sectors currently show longest average payment days at 75-85 days, precisely those likely to seek exemptions. From my experience advising on payment terms across sectors, claims that business models require extreme payment terms typically reflect preference rather than necessity.
Conclusion
What I’ve learned through managing both buyer and supplier sides of payment relationships is that UK government to force maximum payment terms for suppliers to 60 days represents necessary intervention correcting market failure where large buyers exploited bargaining power creating systemic supplier cash flow crises. The legislation will disrupt working capital strategies of major corporations while providing vital liquidity relief to SME suppliers.
The reality is that late payment culture has destroyed thousands of viable small businesses who failed not because of poor products or management but because customers withheld payment for months. UK government to force maximum payment terms for suppliers to 60 days addresses this fundamental injustice that voluntary measures failed to correct.
From my perspective, the most critical factor determining success will be enforcement mechanisms and willingness to impose meaningful penalties on violators. UK government to force maximum payment terms for suppliers to 60 days only works if businesses believe non-compliance carries genuine consequences rather than representing toothless guidance.
What works is recognizing that payment terms represent strategic lever affecting working capital across entire supply chains rather than isolated bilateral agreements. I’ve advised companies through previous payment practice changes, and those that adapted proactively rather than fighting requirements consistently achieved better outcomes.
For business leaders, the practical advice is to model cash flow impacts of 60-day maximum terms immediately, evaluate supply chain finance options if extended terms are strategically important, prepare compliance systems demonstrating payment performance, and recognize that supplier relationship quality increasingly determines competitive advantage. UK government to force maximum payment terms for suppliers to 60 days requires strategic response from both buyers and suppliers.
The UK business landscape will adjust to new payment realities over 12-24 months following implementation. UK government to force maximum payment terms for suppliers to 60 days represents permanent shift in commercial practices that will reshape working capital management, supplier relationships, and small business viability fundamentally.
What payment terms will be mandated?
Maximum payment terms of 60 days will be mandated for large businesses paying suppliers, eliminating current practices where major customers routinely extend terms to 90-120 days and creating estimated £2.5-3.5 billion working capital release to SME suppliers. UK government to force maximum payment terms for suppliers to 60 days through legislation targeting large buyer exploitation.
Which businesses will be affected?
Large businesses above defined revenue or employee thresholds will face mandatory 60-day maximum terms, particularly major retailers, manufacturers, and corporates currently operating 90-120 day payment cycles, with SME suppliers benefiting from faster payment. UK government to force maximum payment terms for suppliers to 60 days focuses on power imbalances between large buyers and smaller suppliers.
How will the policy be enforced?
Enforcement mechanisms remain under development but likely include reporting requirements, regulatory monitoring, penalties for non-compliance, and supplier complaint processes, though effectiveness depends on proactive oversight and meaningful consequences for violations. UK government to force maximum payment terms for suppliers to 60 days faces implementation challenges requiring robust enforcement design.
What about existing contracts?
Existing contracts with terms exceeding 60 days will likely require renegotiation or face override by legislation once implemented, though transition periods may allow phased adjustment, with buyers needing to modify supplier agreements. UK government to force maximum payment terms for suppliers to 60 days overrides contractual agreements favoring large buyers.
Will any industries get exemptions?
Industries including construction, retail, and automotive will likely lobby for exemptions claiming business model requirements justify extended terms, but granting broad exemptions would undermine policy effectiveness and should be resisted except for genuinely unique circumstances. UK government to force maximum payment terms for suppliers to 60 days must limit exemptions to maintain impact.
How will this affect working capital?
Large buyers will experience working capital reductions requiring alternative funding sources or operational changes, while SME suppliers gain working capital relief enabling growth and reducing financing needs, fundamentally redistributing liquidity across supply chains. UK government to force maximum payment terms for suppliers to 60 days injects billions into SME sector.
What is supply chain finance?
Supply chain finance enables third-party financiers to pay suppliers promptly while buyers settle on extended terms, with finance providers earning returns on the working capital gap and costs shared between parties. UK government to force maximum payment terms for suppliers to 60 days will accelerate supply chain finance adoption.
When will the rules take effect?
Implementation timeline remains uncertain but likely follows consultation periods and parliamentary approval requiring 12-24 months from announcement to enforcement, with possible transition periods allowing businesses to adjust systems and contracts. UK government to force maximum payment terms for suppliers to 60 days timing depends on legislative process completion.
Can suppliers report violations safely?
Effective enforcement requires protecting suppliers who report violations from customer retaliation, though designing whistleblower protections for commercial relationships presents challenges different from employment contexts, with success depending on regulatory commitment. UK government to force maximum payment terms for suppliers to 60 days needs supplier protection mechanisms ensuring enforcement effectiveness.
What should businesses do now?
Businesses should model cash flow impacts immediately, evaluate supply chain finance options, prepare compliance systems, renegotiate supplier contracts proactively, and recognize that payment term management becomes strategic priority requiring executive attention. UK government to force maximum payment terms for suppliers to 60 days requires strategic preparation from affected organizations.