Big Businesses Use Small Firms as Free Banks and the UK Is on the Naughty Step

BIG BUSINESSES USE SMALL FIRMS AS FREE BANKS AND THE UK IS ON THE NAUGHTY STEP

A major new report from the Enterprise Research Centre (ERC) (2nd July 2026) has blown the lid off the late payment crisis hitting the UK’s small and micro businesses.

The study shows that late payment isn’t just bad behaviour. It’s baked into the way some big companies treat their suppliers. The small business owners who keep the UK running are the ones who struggle as a result.

BIG BUYERS ARE USING YOU AS AN INTEREST‑FREE LOAN

The report says large companies are systematically extracting interest‑free working capital from their supply chains. In plain English big firms delay paying small firms so they can sit on the cash. They get the benefit. Small business owners get the stress, the overdraft fees, and the sleepless nights.

Even though most countries, including the UK, technically give small suppliers the legal right to charge interest on overdue payments, those rights are quietly crushed by the power imbalance.

SMALL BUSINESSES DON’T CLAIM WHAT THEY’RE OWED

The research reveals a phenomenon called “demand suppression”. You’re legally protected and allowed to enforce payment terms and charge interest and compensation for overdue payments, but you don’t claim because you fear losing the client.

The report says most small businesses choose not to pursue valid claims because they fear retaliation, blacklisting or losing future work. The law exists but small businesses are too scared to use it. That’s not a legal problem. That’s a power problem.

HOW OTHER COUNTRIES DO IT

The ERC review compares late‑payment rules across developed economies. Comparisons show the UK is better than some and less good than others. The rules are there but they’re not enforced.

France

• Strict 60‑day maximum terms

• Heavy fines for late payers

• Public naming and shaming

• Government audits of payment practices

Italy

• Aggressive enforcement

• Mandatory interest

• Criminal penalties for extreme cases

Australia

• Payment reporting laws with real teeth

• Regulators actively investigate late payers

USA

• Federal rules for government suppliers

• Strong protections for subcontractors

UK

Rights exist but enforcement is weak and some bigger buyers pressure small suppliers to waive protections and accept long payment terms in contracts. Overdue payment and poor payment terms are treated as “bad manners” instead of economic abuse. The report says the UK’s system allows big firms to get away with behaviour that other countries punish.

SMALL BUSINESSES ARE BEING STRANGLED

Overdue payments and long payment terms cause:

• cashflow crises that lead to small businesses paying suppliers, bills and wages late

• cancelled investment, lower productivity and reduced growth

• overdraft charges, borrowing costs and reduced margins

• business closures

• sleepless nights and mental health problems

The ERC says late payment is one of the biggest drags on small business growth worldwide and the UK is among the worst offenders.

NEW LEGISLATION IS COMING

The issue of poor payment practice has been on the government’s agenda for nearly 30 years, and this research is a wake‑up call. Poor payment isn’t just a “bad habit”. In many cases it’s a deliberate strategy, used to extract free credit. Poor payments are crushing small businesses. The government recognises the UK’s current enforcement isn’t strong enough and new Commercial Payments Bill is currently making its way through parliament, which if passed, will impose a 60-day maximum payment period in contracts with a few limited exemptions and make interest on late payments automatic.

THE ERC’S VERDICT IS BRUTAL

If ministers want growth in the UK, they must fix poor payment practices with real enforcement and clear rules, because no small business can grow when they’re being used as a bank.

Late payment is a structural abuse of power, and the UK is letting it happen. Small and micro need to be paid fairly and on time for work they’ve already done. Other countries enforce it and the UK is bringing in new legislation to improve the situation. Small businesses don’t just deserve better; the economy depends on it.