In short
Late payment costs the UK economy almost £11 billion a year, with about £26 billion owed to businesses at any time, according to Department for Business and Trade research (2025). It is linked to about 14,000 business closures a year. A Dispute Neutral clause in business terms means a private, binding decision process is agreed before any dispute arises.
Key facts
- Department for Business and Trade research (2025): about £26 billion is owed to UK businesses in late payments at any time.
- The same research links late payment to about 14,000 business closures a year, around 38 a day.
- Average affected business: about £17,000 owed and 86 hours a year spent chasing late payments (DBT, 2025).
- Funding Circle analysis (February 2026) estimated about 2,100 construction firms closed in 2024 because of late payment.
- The Commercial Payments Bill would cap payment terms at 60 days; it was before the House of Commons in October 2026.
Late payments cause an estimated 14,000 business closures a year, about 38 a day, according to Department for Business and Trade research (2025). These are not businesses that failed because their product was wrong or their market disappeared. They are businesses that delivered, invoiced, and were never paid.
The same research estimates that around £26 billion is owed to UK businesses in late payments at any given time, and that over 1.5 million businesses (28%) are affected each year. That is money that was earned, expected, and in many cases already committed to wages, suppliers, and overheads.
The scale of the problem is not abstract. It is happening right now, across every sector, to businesses exactly like yours.
The numbers behind the crisis
Source for the four figures above: Department for Business and Trade research (2025).
Construction is heavily exposed: analysis by Funding Circle (February 2026) estimated that about 2,100 construction firms closed in 2024 because of late payment. Professional services and trades are also exposed — sectors where invoices are raised for completed work and the power imbalance between the creditor and the debtor is often significant.
The hidden cost: 86 hours a year, before legal action even starts
The unpaid invoice itself is only part of the cost. The same Department for Business and Trade research (2025) estimates that 133 million hours of staff time are spent chasing late payments each year, around 86 hours per affected business. That is more than two full working weeks, consumed not by running the business or winning new work, but by chasing money that is already owed.
For a small business owner, 86 hours is not an administrative inconvenience. It is time stolen from growth, from clients, from the work that pays the rest of the bills. And that is before any formal recovery process begins.
Late payment stifles growth and acts as a drag on business productivity. It disrupts the cash flow cycle, can prevent a business from paying its own bills, and can lead to closure. SMEs are particularly exposed as they typically have less cash in reserve to act as a buffer.
Why court is not the answer for most commercial debts
When an invoice goes unpaid, court is often the first thing businesses consider. For most commercial debts up to £150,000, it is rarely the right answer.
The small claims track handles debts up to £10,000 in England and Wales (£5,000 in Northern Ireland), but small claims took a median of 41.0 weeks to reach trial in April to June 2026 (HMCTS civil justice statistics, April to June 2026). For debts above £10,000, claims go to the fast track (up to £25,000), the intermediate track (£25,000 to £100,000, since 1 October 2023) or the multi-track, where solicitor involvement becomes more likely; these claims took a median of 55.9 weeks to reach trial. Court fees alone for a £50,000 claim come to £3,834 (a £2,500 issue fee plus a £1,334 hearing fee) before any legal costs are added, against Dispute Neutral's fee of £1,500 plus VAT for a claim of that size (GOV.UK civil court fees (EX50)).
This is what we call the sub-legal band: the range below the tipping point at which it becomes commercially viable to instruct solicitors and use traditional court processes. Disputes up to £150,000 are often disproportionate to resolve that way, and costs can be incurred that may never be recovered. For disputes in this band, a faster and more proportionate route exists.
A binding decision within 10 business days of the matter being ready
Dispute Neutral is a private, fixed-fee neutral decision service designed specifically for disputes between businesses (companies, partnerships and sole traders acting in the course of business) up to £150,000 in England and Wales and Northern Ireland. It does not currently accept disputes involving consumers. Both parties must agree to use it.
Both parties agree to appoint an independent neutral: an independent lawyer with at least 15 years' practical experience, acting as an expert, not an arbitrator. The neutral reviews the contract, the documents, and the written submissions from both sides. There is no hearing. Neither party needs a solicitor. The neutral issues a binding decision.
At Dispute Neutral, that decision is issued within 10 business days of the matter being ready. Fees are fixed and banded: £650 (claims up to £4,000), £900 (£4,001 to £10,000), £1,200 (£10,001 to £25,000) or £1,500 (£25,001 to £150,000), plus VAT, or £1,500 plus VAT for a non-money decision on a commercial matter. Each side's written case can run to 15, 25, 30 or 50 pages for those bands (50 pages for a non-money decision). The process is private. And the outcome is binding on both parties as a matter of contract.
It is not a court. It is not mediation. It is not a law firm acting for either side. It is a private, contract-based neutral decision service — designed for the gap where court is too slow, too expensive, and too disruptive to be the right answer.
Build protection in before a dispute arises
The most effective time to deal with a payment dispute is before it happens. Businesses that include a Dispute Neutral clause in their standard terms of business or client contracts ensure that if a dispute arises, both parties have already agreed to a private, binding resolution process — without needing to persuade a reluctant counterparty after the relationship has broken down.
Draft clauses suitable for immediate use are available in the Include us section of the site. For any business that raises invoices regularly — particularly in construction, professional services and trades — including a Dispute Neutral clause in business-to-business terms is one of the most practical protective steps available.
Dispute Neutral decides disputes between businesses only, so the clause is for business-to-business terms, not contracts with consumers such as parents or homeowners.
A note on construction work
Under a construction contract with a business, either party has a statutory right to adjudication under the Housing Grants, Construction and Regeneration Act 1996, even if the contract says nothing about it. Neither side has to use it, and the parties can agree to use Dispute Neutral instead. Many smaller jobs run on little more than a quote and an acceptance, with few terms, which is why a Dispute Neutral clause in your terms of business helps. Work for homeowners is a consumer contract, so consumer law applies and Dispute Neutral cannot currently decide it.
Frequently asked questions
How serious is the late payment problem for UK SMEs right now?
Serious. Department for Business and Trade research (2025) estimates that late payments cost the UK economy almost £11 billion a year, with around £26 billion owed to businesses at any given time. The Government's Commercial Payments Bill, announced in the King's Speech in May 2026 and introduced in the House of Lords on 19 May 2026, would cap payment terms at 60 days, make interest on late payment automatic and give the Small Business Commissioner new powers. In October 2026 it had passed the Lords and was before the House of Commons, so it is not yet law. The voluntary Prompt Payment Code has been replaced by the Fair Payment Code.
What sectors are most affected by late payment and unpaid invoice disputes?
Construction is heavily exposed: Funding Circle's analysis (February 2026) estimated about 2,100 construction firm closures in 2024 linked to late payment. Professional services — including accountants, consultants, architects, engineers, and agencies — are also heavily affected, as are tradespeople and SMEs in supply chain relationships. Dispute Neutral covers disputes between businesses in all of these sectors up to £150,000. Disputes involving consumers, such as parents or homeowners, are outside its scope.
Can I use Dispute Neutral if the other side simply refuses to engage?
Both parties need to agree to use the process. If the other side refuses, court or a debt collection agency remain options. However, many businesses that resist formal court proceedings will engage with a private, fixed-fee process — particularly when the alternative is a public claim that carries its own costs risks for both sides. Businesses that include a Dispute Neutral clause in their business-to-business terms from the outset largely remove this problem: the process is already agreed before any dispute arises.
Is a neutral decision binding, and what if it is not followed?
It is binding, but it is not a court judgment. Both parties agree in advance, as a matter of contract, to be bound by the decision of an independent lawyer acting as an expert. The decision is binding and should cut out much of the time and court process. If it is not followed, depending on the matter it may be possible to apply straight for summary judgment, or to serve a statutory demand where appropriate, or the decision may simply fast-track the resolution. The right course depends on the matter.
Ready to stop chasing and start resolving?
If your business is dealing with an unpaid invoice, a disputed commercial debt, or a trade dispute up to £150,000, and the other side will agree to use it, Dispute Neutral offers a faster, more proportionate, and more private route to a binding outcome than court.
Want to protect your business before a dispute arises? Draft contract clauses are available in the Include us section.
Start a matter →Both parties agree • Private • Banded fixed fees • Binding decision within 10 business days of the matter being ready