The 60-Day Hard Cap: Why the UK’s New Payment Reform Is a Working Capital Wake-Up Call

The UK government has made its direction clear: late payment reform is moving from encouragement to enforcement. In its March 2026 response to the “Time to Pay Up” consultation, the government confirmed its intention to introduce what it describes as the most significant legislation on late payments in over 25 years - and one of the strongest frameworks across the G7.

At the center of the package is a proposed hard 60-day cap on payment terms in the UK is being introduced in transactions where large businesses pay smaller suppliers. Just as important, the long-relied-on “grossly unfair” standard - which previously allowed extended terms under certain conditions - is being removed.

This is not just a technical adjustment. It is a structural shift in how working capital is distributed across the UK B2B economy.

Beyond the Cap: A New Compliance Framework

The proposed 60-day limit is only one element of a broader enforcement framework designed to reshape payment behavior.

The UK government intends to:

Introduce mandatory statutory interest at 8% above the Bank of England base rate, removing the ability to contract out through alternative remedies
Strengthen the powers of the Small Business Commissioner, enabling investigations, dispute resolution, and financial penalties for persistent late payers
Require board-level accountability, including public explanations from companies with poor payment performance
Introduce statutory deadlines for invoice disputes, with financial consequences for missing those windows

Together, these measures signal a clear shift: late payment is no longer a commercial negotiation issue - it is becoming a regulatory risk.

The Strategic Impact: Tenor Compression and Liquidity Shifts

For treasury, procurement, and finance teams, the implications are immediate - even before formal implementation.

The most direct impact is tenor compression.

Supply Chain Finance (SCF), receivables finance, and factoring programs often rely on longer payment cycles - 90, 120, or even 180 days. A regulatory cap at 60 days will require these structures to be reassessed and, in many cases, redesigned.

This does not eliminate liquidity needs - but it fundamentally changes:

Where liquidity is required
How it is structured
Which counterparties are affected

At a system level, this reform introduces a forced redistribution of working capital. Larger buyers operating on extended terms will be required to release liquidity back into the supply chain - particularly to smaller suppliers.

Importantly, this shift is not accidental. The government has made clear that some disruption to larger businesses’ working capital positions is an intentional outcome of the reform.

Not a Universal Rule: Where Complexity Remains

While the 60-day cap is central, it is not universal across all B2B transactions.

The framework is expected to include targeted exemptions, such as:

Transactions between two large businesses
Cases where the smaller entity is the buyer
Import and export contracts

Additionally, elements such as invoice verification processes may still influence when payment obligations formally begin.

This means one thing: The challenge is not just compliance - it is interpretation.

Companies that oversimplify the regulation risk either overcorrecting commercially or underestimating their exposure.

‍From Policy to Practice: Why Precision Becomes Critical

This reform transforms payment terms from a negotiation lever into a regulated parameter.

In this environment, companies must answer critical questions with precision:

Where do our current payment terms exceed regulatory thresholds?
Which suppliers fall within scope vs. exemption?
Where is flexibility still available - and where is it not?
How do our terms compare to market standards under these constraints?

Without clear, data-backed answers, decision-making becomes reactive - and risk increases.

A Data-Driven Response to a Regulated Environment

As payment terms become more regulated, the ability to act strategically depends on visibility.

Organizations will need to move beyond:

Static policies
Internal benchmarks
Assumptions about supplier behavior

…and toward:

Market-based benchmarking
Supplier-level intelligence
Scenario-driven decision-making

In a 60-day world, the question is no longer how to extend terms -
but where optimization is still possible within the rules.

Navigating the 60-Day World

This is where Calculum’s approach becomes particularly relevant.

When regulatory pressure compresses payment terms, the competitive advantage shifts toward companies that can identify:

Where terms can still be optimized without breaching regulation
Which suppliers can support alternative structures (e.g., financing, pricing adjustments)
How to balance liquidity, risk, and supplier relationships

Calculum provides treasury and procurement teams with data-backed visibility across the financial supply chain - including payment terms benchmarking, supplier financial profiles, and negotiation intelligence.

Powered by one of the largest payment terms databases globally - covering over 7.1 million companies and $3.3 trillion in analyzed spend - Calculum enables organizations to replace guesswork with precision and make informed decisions in an increasingly regulated environment.