Guide · For trades firms
Late payment and chasing invoices: what does it cost a UK trades firm?
138 hours a year on the phone about money you have already earned. Here is what late payment really costs, when to chase, and how to chase without falling out with the customer.
The short answer
The biggest cost is not the money. It is the time spent asking for it.
A small firm of 10 to 49 people spends 138 hours a year chasing money it has already earned, worth about £2,337. That is roughly three and a half working weeks, and staff time is the single largest late-payment cost at business level, ahead of debt collection, legal costs and finance costs.
Late payment costs the UK economy almost £11 billion a year. But the cost inside an individual firm is not interest or legal fees, it is people, ringing people. A medium firm of 50 to 249 people spends 324 hours, worth about £5,484. Those figures come from the government's own research. Here is the detail, and what the new law does and does not change.
The size of it
How much does late payment cost UK businesses?
Almost £11 billion a year across the economy, roughly 0.4% of GDP. (Department for Business and Trade and the Small Business Commissioner, July 2025)
At any given moment:
- £26 billion is owed in late payments.
- That averages £17,000 per affected business.
- Over 1.5 million businesses, 28% of all of them, are affected each year.
- 14,000 businesses close each year because of it, about 38 a day. The government publishes this as a central estimate with a wide range around it, roughly 2,000 to 27,000, so treat it as an official best estimate rather than an exact count.
The cost nobody puts a number on
How many hours do firms spend chasing invoices?
86 hours a year for the average affected business, and 133 million hours across the UK economy. Broken down by size:
| Size of firm | Hours a year chasing | Cost of that time |
|---|---|---|
| Small (10 to 49 people) | 138 hours | £2,337 a year |
| Medium (50 to 249 people) | 324 hours | £5,484 a year |
(Department for Business and Trade, July 2025)
138 hours is about three and a half working weeks. 324 hours is about eight. Staff time spent chasing is the single largest late-payment cost at business level, ahead of debt collection, legal costs and finance costs.
The unclaimed win
When should you chase an invoice?
Before it is due. Only 4.1% of businesses do this, which makes it the most obvious unclaimed win in the whole subject.
A workable sequence:
- A few days before the due date: a short, friendly reminder that it is coming up. Not a chase. Just a note.
- On the due date: a plain "this is due today" with the invoice attached again.
- A week after: a direct but polite follow-up naming the amount and the date.
- Later: a reference to your terms and statutory interest, if you intend to use it.
The early reminder does most of the work, because a lot of late payment is not refusal, it is an invoice sitting in someone's inbox.
The bit that actually stops people
How do I chase an invoice without falling out with the customer?
Chase early, chase consistently, and keep it boring.
- Make it routineA reminder that always goes out on the same schedule is not an accusation. A reminder that only goes when you are annoyed reads like one.
- Attach it againPut the invoice in the message again. A surprising share of "late" invoices were simply lost.
- Never open angryNever let the first contact be an angry one. If your first message is on day 45 and it is cross, you have skipped every cheap step.
- Keep the recordEvery reminder logged, so if it does escalate the trail already exists.
- Why it gets put offThe awkwardness is the real reason chasing gets put off, especially in domestic trades where you liked the customer. Taking the decision out of it, so the reminder just goes, is most of the fix.
The sector picture
Is construction the worst sector for late payment?
Yes, on the measures that exist.
- 10.1% of construction firms say late payment is a "big problem", the highest of any UK sector. (Department for Business and Trade, Longitudinal Small Business Survey)
- Construction had 3,803 company insolvencies in the 12 months to May 2026, 17% of all cases where the industry was recorded, the highest of any sector. (The Insolvency Service, June 2026)
One caveat, because you may see the opposite claimed. The Insolvency Service also publishes a business-level count, and on that measure wholesale and retail overtook construction in 2025. The Insolvency Service states that the two sets are not comparable, because one business can contain several companies. On the company measure, construction is still top.
What nobody can tell you is how many of those failures late payment actually caused. The Insolvency Service publishes counts, not causes. Anyone giving you a percentage there has made it up.
The part the headlines will miss
Will the new late payment law help construction?
Partly, and less than the headlines will suggest.
The Commercial Payments Bill was introduced in May 2026. It brings in:
- A 60-day maximum payment term, with limited exemptions.
- Mandatory statutory interest at 8% over base.
- Investigation and binding interim adjudication powers for the Small Business Commissioner.
- Six-monthly payment reporting retained.
- A proposed ban on withholding retentions under construction contracts, subject to further consultation on timing.
But the Small Business Commissioner's powers do not cover construction disputes. The industry already has its own statutory adjudication scheme, so construction disputes are out of scope. (Build UK, October 2025)
So the reform that will be reported everywhere as the fix for late payment largely does not reach construction disputes. The retentions proposal is the part of the Bill that matters most to the sector, and it is not settled yet.
The number everyone gets wrong
What is the maximum payment term in the UK in 2026?
The Commercial Payments Bill proposes 60 days, with limited exemptions.
Two related numbers get confused with it:
- 45 days applies to central government contracts under PPN 018, from 1 October 2025. It was also proposed as a future general maximum, and the government said it does not intend to take that forward now.
- 30 days is the default term under the Late Payment of Commercial Debts (Interest) Act 1998 where no term is agreed.
One piece of good news
Are main contractors actually paying faster?
At the top of the supply chain, yes. Build UK's tier one contractor members took their average payment time from 45 days down to 29 days, and now pay 96% of invoices within 60 days. None of them averages more than 45 days. (Build UK, October 2025)
Where an agent helps
Can an AI agent chase my invoices?
Yes, for the routine part, which is most of it.
It sends the reminder before the invoice is due, which almost nobody does. It sends the one on the day, and the one after. It uses your firm's own wording and your own terms, and it logs every message so the trail exists if you need it.
It cannot make anyone pay
It is not a solicitor and it does not do adjudication. If a main contractor is deliberately withholding, you need people and advice, not software.
It will not rescue a bad contract
If you agreed 90-day terms, the most it can do is remind them politely on day 91.
It does not guess
It works from your own terms and records. If it is not certain, it says so and hands off to a person.
Frequently asked questions
The questions firms ask first.
How much does late payment cost the UK economy?
Almost £11 billion a year, about 0.4% of GDP, according to research for the Department for Business and Trade and the Small Business Commissioner published in July 2025.
How many businesses close because of late payment?
About 14,000 a year, or 38 a day, on the government's central estimate. The published range is wide, roughly 2,000 to 27,000.
How much time do small businesses spend chasing payment?
138 hours a year for firms of 10 to 49 people, costing about £2,337. For firms of 50 to 249 people it is 324 hours, costing about £5,484.
How much is owed in late payments at any one time?
£26 billion, averaging about £17,000 for each affected business.
Does the Small Business Commissioner cover construction disputes?
No. Construction disputes are out of scope because the industry has its own statutory adjudication scheme. The new binding adjudication powers in the Commercial Payments Bill therefore do not reach them.
What percentage of firms chase invoices before they are due?
4.1%.
Where the facts come from
Every figure, and the page it came from.
- £11 billion a year; £26 billion owed; £17,000 per affected business; 1.5 million businesses (28%); 14,000 closures (38 a day); 133 million hours; 86 hours per affected business; 138 hours and £2,337 (small); 324 hours and £5,484 (medium); staff time the largest business-level cost; 4.1% chase before the due date; 10.1% of construction firms call it a "big problem". Department for Business and Trade and the Office of the Small Business Commissioner, research by London Economics, July 2025. assets.publishing.service.gov.uk/media/688a089a6478525675738ff9/late_payments_research_impact_on_uk_economy.pdf
- Construction 3,803 insolvencies, 17% of cases, 12 months to May 2026, highest of any sector. The Insolvency Service, 19 June 2026. gov.uk/government/statistics/company-insolvencies-may-2026/commentary-company-insolvency-statistics-may-2026
- The business-level measure and the non-comparability statement. The Insolvency Service, Business Insolvency Demography 2015 to 2025, 19 June 2026. gov.uk/government/statistics/business-insolvency-demography-2015-to-2025/commentary-business-insolvency-demography-2015-to-2025
- Commercial Payments Bill: 60-day maximum, 8% over base, Small Business Commissioner powers, retentions proposal. Department for Business and Trade, May 2026. gov.uk/government/publications/commercial-payments-bill-factsheets/commercial-payments-bill-overview
- The 45-day maximum proposed and not taken forward. Department for Business and Trade, government response, March 2026. gov.uk/government/consultations/late-payments-tackling-poor-payment-practices/outcome/late-payment-consultation-time-to-pay-up-government-response-web-version
- Construction disputes out of scope of the Small Business Commissioner; tier one average payment 45 to 29 days; 96% within 60 days. Build UK, October 2025. builduk.org/wp-content/uploads/2025/10/Build-UK-Response-to-Late-Payments-Consultation.pdf
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