A ban on construction retention, interest on late payments and fines for perennial offenders are amongst a a stack of hard-hitting legislative interventions announced today by the UK Government as they set out to clamp down once and for all on payment abuse.

In what is undoubtedly the largest and most ambitious set of reforms in over a generation, this heralds a landmark day for construction.  The changes announced will include a new 60-day cap on payment terms on all large firms when paying smaller suppliers.  New mandatory interest on late payments will also be introduced, with a requirement for all commercial contracts to include statutory interest set at 8% above the Bank of England base rate.

For example, if a small business is owed £10,000 by one of its customers and is paid 60 days later than the agreed payment date, they will be owed £10,293.15 including mandatory interest (£10,000 plus £193.15 interest plus £100 compensation).

The Government also propose to ban the withholding of retention payments under the terms of construction contracts, consulting on its implementation. This will prevent small firms losing retentions to insolvency or non-payment.

In addition The Small Business Commissioner (SBC) will be given sweeping new powers to investigate poor payment practices and fine the worst offenders – with fines worth tens of millions for firms that persistently pay late or fail to comply with the new laws.  The SBC will also be given the power to adjudicate payment disputes, but FIS has been advised that this element will not apply to contracts currently covered by the Construction Act.

The measures, announced will be the toughest in the G7 and will build upon and strengthen legislation on late payments, first laid out in the 1998 Late Payment of Commercial Debt Act, over 25 years ago.  The stated aim is to boost the economy by giving small businesses better cashflow and ultimately tackle a problem that is estimated to be costing the UK economy £11 billion every year and address issues that are contributing to 38 businesses shut their doors every single day because they are not paid on time.

Responding to the announcement, Iain McIlwee, FIS Chief Executive said:

 “This is a landmark day.  We have long called for retention to be abolished and the scourge of late payment to be addressed through regulation and here we are – a plausible set of recommendations laid out and a timeline is being set.  These issues have been a cancer at the core of our sector.  Negative behaviours have become the norm and have restricted capacity, inhibited workforce development and diminished the sector’s ability to perform.

We applaud Government for taking this stand and colleagues in the Civil Service for helping to champion the concerns of the supply chain and setting the wheels in motion for change.

We appreciate this is not the end, but we do very much see it as the beginning of the end for the worst of payment abuse and FIS has already committed to working with Government, the Small Business Commissioner and colleagues from across construction to make sure that the intent of these regulations is delivered and the opportunity to reshape construction is fully grasped”

Business Secretary Peter Kyle said:

“Far too many businesses are forced to shut down because they have not been paid – that is simply unacceptable.

“We are unveiling the strongest, most robust changes to payment laws in over a generation – laws that will transform the fortunes of small businesses for years to come and make their day to day lives much easier.”

Minister for Small Business and Economic Transformation, Blair McDougall said:

“I know first-hand how difficult late payments can be, forcing you to decide if you can afford to keep a business running, pay employees or even buy Christmas presents for your children.

“That is why I’m proud to be leading the charge on tackling a problem that has been left untouched for far too long.

“These are genuinely game changing measures that will ensure no business, no employer, no family has to endure the immense strain of being left strapped for cash they have already earnt.”

Emma Jones CBE, Small Business Commissioner said:

“We are on a mission to make life easier for small firms by getting money moving faster through the economy by tackling late payments. The measures the Government has announced today will strengthen the role of my office in taking on the worst payers alongside ensuring small businesses have a stronger voice on payment terms and late payment interest. These reforms will reduce the hours spent chasing debt allowing small businesses to focus on more productive and enjoyable growth.”

FIS has already met with officials to understand the extent and timline of this work and will keep members informed, but this is undoubtedly a positive day for all in the construction supply chain and a clear step towards a better payment culture in the sector.

You can see the published documents here: Late payments: tackling poor payment practices – GOV.UK

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The Construction Products Association Q4 Construction Trade Survey reports that the final three months of 2025 marked another quarter of downbeat reports from the construction supply chain.

For heavy side product manufacturers, the net balance that reported a fall in quarterly sales was the lowest since 2020 Q2, at the height of the pandemic lockdowns. Significantly, heavy side products and materials tend to be used in the earlier phases of construction, which adds to the picture of uncertainty stalling project starts seen throughout the second half of last year. Workloads were also reported to have fallen for chartered surveyors, extending a run of flat or negative growth to five quarters. Light side manufacturers and civil engineering contractors reported modest growth in sales or workloads.

A new report published today sets out how Scotland can strengthen the flow of new entrants into the construction and built environment workforce, helping ensure the sector has the people and skills needed to deliver against the country’s future ambitions.

The report, Pathways to Productivity, commissioned by Skills Development Scotland on behalf of the Skills and Workforce Group of the Construction Accord and delivered by BE-ST, explores how the industry can attract, recruit, develop, train and retain a new generation of skilled workers.

The research draws on engagement with employers, representative bodies, education and training providers and public sector partners across Scotland. The focus is on exploring what conditions are needed to ensure employers within the sector can recruit and train the future workforce it needs. It provides insight into how the current system supporting workforce entry operates and identifies how to strengthen and scale these pathways in the years ahead, creating more opportunities for employers to recruit and overcome skills imbalances.

Construction plays a vital role in Scotland’s economic, environmental and social priorities, from delivering homes and hospitals to upgrading infrastructure and supporting the transition to net zero. Ensuring the sector has a strong and resilient workforce will be key to delivering these ambitions.

Forecasts suggest the construction workforce could grow to around 214,500 by 2029. However, with the Construction Industry Training Board estimating that around 8% of the workforce must be replaced each year due to natural attrition, continued focus on attracting and developing new entrants will remain essential.

At the same time, the sector is evolving rapidly, with increasing demand for skills linked to digitalisation, modern methods of construction and new performance standards. This creates an opportunity to design workforce pathways that not only increase participation in the sector but also support the development of the competencies required for a modern built environment.

The report highlights the importance of strengthening collaboration across the construction skills ecosystem including employers, training providers, representative bodies and public partners to ensure pathways into the industry are accessible, flexible and aligned with future workforce needs.

It identifies six shared measures of success that stakeholders see as central to strengthening the flow of new entrants: workforce capacity, competence, employer confidence, sector culture, workforce composition, and long-term continuity in workforce planning.

The findings form part of wider work under the Construction Leadership Forum’s Skills and Workforce Mission to support workforce development and strengthen the long-term resilience of Scotland’s construction industry.

The research was informed by sector engagement events delivered in partnership with Skills Development Scotland and the Construction Leadership Forum’s Skills and Workforce Group, alongside a survey distributed through networks including BE-ST and the Construction Leadership Forum.

The Executive Summary for Pathways to Productivity is available to read now.

Douglas Morrison, Deputy CEO at BE-ST said:

“Scotland’s construction sector faces long term challenges in both workforce capacity and capability, set against rapidly evolving client and industry requirements. Through engagement with stakeholders across the system, there is clear motivation to increase the flow of new entrants and strengthen lifelong learning.

“However, while there is broad agreement on the challenges, perspectives on solutions vary significantly. This report does not seek to prescribe a single answer but instead sets out a range of practical levers to transform and optimise how we recruit, develop and sustain the workforce for the future. We intend for it to inform longer term discussions on evolving our approach and to encourage active engagement from all those involved across the system.”

Elaine Ellis, Skills Planning Manager (Construction and Net Zero) at Skills Development Scotland, said:

“Workforce and skill shortages persist across many key roles in construction, yet individuals wishing to train for these positions encounter significant barriers to entry and often struggle to secure the new entrant roles necessary for developing competence.

“This research explores some of the reasons behind this paradox. Its aim is to act as a catalyst for change and to set out some of the barriers that need to be addressed. Supporting people to enter the sector – and, crucially, ensuring they can develop the skills required for the future – is not only a win for those aspiring to join a sector rich with opportunity, but also a win for the sector itself and our wider built environment.”

Iain McIlwee, CEO Finishes and Interiors Sector said:

“This report is excellent – it captures the essence of the skills challenge for construction clearly and vitally makes some practical recommendation. Encouraginly too findings are consistent with conversations that have happened through the Contruction Skills Mission Board. Whilst it remains a challenge, I am encouraged that the industry across the UK is starting to pull together and that the support we need is being mobilised. In the backdrop of all that is going on in the world, it is easy for skills to slip down the agenda, but we can’t let this happen or we find ourselves lurching from crisis to crisis and transformation is forever on tomorrow’s list.”

A copy of the report Pathways to Productivity is available here.

To find out how FIS is helping members manage competency and support recruitment, visit FIS Skills Hub here.

If you want to put questions about Skills that you want to put to the runners and riders in the Scottish Elections, why not attend the construction virtual hustings on the 25th March – secure your spot here.

FIS is highlighting an important upcoming change to the UK tax system, with Making Tax Digital (MTD) for Income Tax set to come into force from 6 April 2026.

The update, highlighted by Build UK, represents a significant shift in how self-employed individuals manage and report their tax, forming part of HMRC’s wider programme to modernise the tax system and reduce errors.

What is Changing?

The new system will be introduced in phases over the next three years, beginning with individuals who have an annual turnover above £50,000.

Under the new requirements, affected individuals will need to:

• Use HMRC-recognised software to keep digital records of income and expenses
• Submit quarterly updates to HMRC via their chosen software
• Receive an estimated tax position based on submitted data
• Continue to pay a single annual tax bill, with the deadline remaining 31 January

Both free and paid software options are expected to be available, allowing individuals to select a system that suits their business needs.

What You Need to Do

Individuals who meet the criteria will need to:

• Check their eligibility for the new service
• Sign up in advance, as enrolment will not happen automatically

HMRC has published further guidance, including a series of frequently asked questions, to support businesses and individuals in preparing for the transition.

Why This Matters

This change will affect many self-employed individuals working across the finishes and interiors sector, particularly those operating as sole traders or subcontractors.

Early preparation will be key to ensuring a smooth transition to digital record keeping and reporting.

FIS encourages members to review the requirements and consider how the changes may impact their business processes.