Plain answer
Late payment and chasing payment: what does it cost a UK construction firm?
A firm of 50 to 249 people spends 324 hours a year chasing money it has already earned, worth about £5,484. That is eight working weeks. 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. A firm of 10 to 49 people spends 138 hours, worth about £2,337. Those figures come from the government's own research.
In construction, though, this is not a collections problem. It is an admin discipline problem that turns into one. 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:
is owed in late payments across the economy.
is the average owed per affected business.
businesses, 28% of all of them, are affected each year.
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)
324 hours is about eight working weeks. Two months of somebody's year, every year, spent asking for money the firm has already earned and already paid its people for. Staff time spent chasing is the single largest late-payment cost at business level, ahead of debt collection, legal costs and finance costs.
And it is almost never a dedicated credit controller doing it. In a firm that size it is the commercial manager, or the contracts manager between site visits, or the one person in the office who is already doing four other things.
Why it is different here
Why does chasing fall apart in a construction business?
Because most of what you are owed was never a simple invoice. It is an application, a valuation, a notice and a retention, each with its own date, and each one dependent on a document going out on time. The money follows the paperwork. When the paperwork slips, the money slips with it, and by then it is not a phone call, it is a position.
Went in a day late, so it missed the cycle and moved a month, not a day.
Nobody issued it, because the person who issues it was on site.
Nobody has looked at it since practical completion, and nobody owns the date.
You are chasing other businesses, up a supply chain, on terms you did not really get to negotiate. The awkwardness is not personal, it is commercial.
A chunk of what you are owed is not even late yet. It is just held. That is the part a collections mindset never sees, because there is nothing to collect until somebody has done the admin that makes it due.
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 reminder that it is coming up. Not a chase. Just a note.
A plain "this is due today" with the paperwork attached again.
A direct but polite follow-up naming the amount and the date.
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 a document sitting in someone's inbox. Chase early, chase consistently, and keep it boring. A reminder that always goes out on the same schedule is not an accusation. A reminder that only goes when somebody is annoyed reads like one, and in a supply chain you have to work in again next year, that costs more than the invoice.
The sector picture
Is construction the worst sector for late payment?
Yes, on the measures that exist.
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)
company insolvencies in construction 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 Small Business Commissioner's new binding adjudication powers, the reform that will be written up everywhere as the answer to late payment, do not cover construction disputes.
The Commercial Payments Bill was introduced in May 2026. It brings in:
A maximum payment term, with limited exemptions.
Mandatory statutory interest.
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 adjudication route you already had is still the adjudication route you have. 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:
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.
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)
The top of the supply chain has moved. That is worth knowing before you assume every conversation is going to be a fight.
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 payment 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.
In a construction business the useful part is upstream of the chase: the date that nobody owns, the notice that has to go out this week, the retention that has been sitting since practical completion. Held on a rolling schedule and surfaced in good time, rather than found late.
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 firms spend chasing payment?
324 hours a year for firms of 50 to 249 people, costing about £5,484. For firms of 10 to 49 people it is 138 hours, costing about £2,337.
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.
Department for Business and Trade and the Office of the Small Business Commissioner, research by London Economics, July 2025
£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". assets.publishing.service.gov.uk/media/688a089a6478525675738ff9/late_payments_research_impact_on_uk_economy.pdf
The Insolvency Service, 19 June 2026
Construction 3,803 company insolvencies, 17% of cases, 12 months to May 2026, the highest of any sector. gov.uk/government/statistics/company-insolvencies-may-2026/commentary-company-insolvency-statistics-may-2026
The Insolvency Service, Business Insolvency Demography 2015 to 2025, 19 June 2026
The business-level measure and the non-comparability statement. gov.uk/government/statistics/business-insolvency-demography-2015-to-2025/commentary-business-insolvency-demography-2015-to-2025
Department for Business and Trade, May 2026
Commercial Payments Bill: 60-day maximum, 8% over base, Small Business Commissioner powers, retentions proposal. gov.uk/government/publications/commercial-payments-bill-factsheets/commercial-payments-bill-overview
Department for Business and Trade, government response, March 2026
The 45-day maximum proposed and not taken forward. gov.uk/government/consultations/late-payments-tackling-poor-payment-practices/outcome/late-payment-consultation-time-to-pay-up-government-response-web-version
Build UK, October 2025
Construction disputes out of scope of the Small Business Commissioner; tier one average payment 45 to 29 days; 96% within 60 days. builduk.org/wp-content/uploads/2025/10/Build-UK-Response-to-Late-Payments-Consultation.pdf
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