Commercial Payments Bill: what changed at Committee stage?

The Commercial Payments Bill completed Committee stage in the House of Lords on 21 July, with peers debating more than 100 amendments covering payment terms, retentions, statutory interest, the Procurement Act and the powers of the Small Business Commissioner. The Bill’s core construction provisions remained unchanged, while government amendments clarified drafting and aligned public sector payment rules more closely with the wider framework. 

Payment terms and retentions hold firm 

The 60-day maximum payment period for private sector contracts and the 30-day limit for public authorities remain unchanged. Proposals to reduce the private sector cap to 30 days immediately, or to commit to a future move to 45 days, were both withdrawn or not pressed to a vote. 

The proposed ban on retentions also remained intact. Peers tabled amendments seeking a more limited approach, including narrowing the ban by business size, capping retentions at 2% rather than prohibiting them altogether and allowing a defined defects period before final payment. The government rejected all three, arguing that retentions do not reliably secure quality and that the industry should instead develop alternatives such as performance bonds. 

The transition timetable remains unchanged. Retention clauses in new construction contracts become void two years after commencement, while existing retention clauses cease to have effect after three years, at which point outstanding retained sums become payable under the Bill’s statutory 30 or 60-day timetable. 

Statutory interest and insolvency risk 

A proposal to delay the strengthened statutory interest provisions by a year was withdrawn after the government confirmed sufficient lead-in time is already built into the commencement plan. 

Peers also raised a gap affecting suppliers to companies under special administration, citing Thames Water as an example. While the Bill’s payment provisions apply to supplies made after a special administrator is appointed, older arrears continue to rank as ordinary unsecured debt with no added protection. An estimate of £835 million in potential write-offs for Thames Water’s suppliers was cited during debate, though this was not an official government figure. The government agreed to look into the issue further ahead of Report stage. 

Still to be resolved 

The government resisted standardising the definition of small and large businesses across legislation, preferring secondary legislation following consultation. A published funding plan for the Small Business Commissioner and stronger whistleblower protections were both raised but not committed to. 

The government reiterated that the 60-day cap follows consultation with more than 850 respondents and put several figures on record, including an £11 billion estimated annual cost of late payment, and evidence that 65% of retentions are released late with 20% never recovered. 

Having completed Committee stage, the Bill now moves to Report stage. 

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