The UK Government’s new Fair Payment Code (FPC) represents a major shift in how construction businesses must handle supplier payments and supply chain relationships.
Replacing the Prompt Payment Code (PPC), the Fair Payment Code introduces stricter standards and a tiered award system to encourage fairer transactions across the industry.
With construction insolvencies rising nearly 50% between 2021 and 2024, the need for faster, more reliable payments has never been more urgent. Over recent years, industry collapses such as the Buckingham Group (2023), Tolent (2023), ISG (2024) and Stewart Milne Group (2024), have underscored the devastating impact of late payments and financial mismanagement. The new Fair Payment Code framework is designed to reduce these risks, strengthen supply chains, and create a more financially sustainable industry.
Compliance with the Fair Payment Code may well be a key factor for contractors, subcontractors, and key decision-makers in securing tenders, maintaining strong supplier relationships, and ensuring long-term financial stability.
This Fair Payment Code explained article provides the latest updates on the new Fair Payment Code, its evolving impact on the construction industry, and the new compliance challenges contractors need to address to achieve the highest accreditation, the gold award.
Is the Fair Payment Code the same as the old Prompt Payment Code?
Before the introduction of the Fair Payment Code, the Prompt Payment Code served as the UK’s primary initiative for tackling late payments and supply chain delays, encouraging businesses to pay suppliers promptly, setting a standard of 95% of invoices paid within 60 days and requiring smaller suppliers to be paid within 30 days.
Compliance was voluntary, and enforcement was limited, with many large contractors failing to meet the expected standards without facing significant consequences.
The introduction of the Fair Payment Code marks a major shift in how the UK government addresses payment performance and financial accountability.
Listed below are some of the key differences between the two codes.
New award tiers in the Fair Payment Code
Unlike its predecessor, the new Fair Payment Code introduces a tiered award system (gold, silver, and bronze) allowing businesses to be recognised based on their actual payment practices rather than a one-size-fits-all approach. The gold award now sets a higher standard, requiring businesses to pay 95% of all invoices within 30 days, whereas the silver and bronze levels retain the 60-day threshold but with additional conditions. This tiered award structure enables businesses to progressively improve their payment performance while giving suppliers greater transparency over contractors' financial practices.
New enforcement rules with the Fair Payment Code
Another key difference is enforcement.
Under the Prompt Payment Code, failure to comply resulted in little more than removal from the scheme. In contrast, the new Fair Payment Code strengthens oversight, with the Small Business Commissioner (SBC) now granted expanded powers to investigate breaches, enforce penalties, and publicly expose non-compliant companies. Additionally, the Payment Practices Reporting Regulations (PPR) now require large businesses to disclose detailed payment data, ensuring greater transparency across supply chains.
Although signatories to the Prompt Payment Code do not automatically become Fair Payment Code Award holders and are required to apply to the Fair Payment Code separately, the Fair Payment Code standards go beyond the Prompt Payment Code's focus on payment speed, encouraging a cultural shift in construction finance by promoting clear contract terms, structured invoicing, and better supplier engagement.
The Fair Payment Code remains as voluntary
While compliance remains voluntary, businesses achieving the Gold Award are setting a new industry benchmark, demonstrating a commitment to financial integrity and supply chain stability that goes beyond mere regulatory requirements.
How does the Fair Payment Code work and what are the awards?
The Fair Payment Code is a Government-led initiative designed to improve payment performance and supply chain accountability. It introduces a three-tiered award system that recognises businesses based on their ability to pay suppliers within a set timeframe.
Businesses may now apply for the Award tier which best suits them: Gold, Sliver or Bronze.
The gold standard award
A gold award is the highest standard of payment compliance under the Fair Payment Code. To achieve this level, businesses must ensure that 95% of all invoices (regardless of supplier size) are paid within 30 days.
This requirement reflects a commitment to best-in-class financial responsibility, ensuring that subcontractors and suppliers receive payments promptly, reducing financial strain across the supply chain. Gold-level businesses demonstrate that rapid and fair payment practices are not just theoretical but achievable in a real-world construction environment.
Learn more about why construction contractors should strive for the gold award.
The silver standard award
The silver award strikes a balance between ambition and practicality. To qualify for silver, businesses must pay 95% of invoices within 60 days, but they must still meet the 30-day standard for small business suppliers.
This structure acknowledges the complexity of managing payments across large projects while prioritising the financial stability of smaller suppliers who often lack the resources to absorb late payments. For many companies, silver represents an excellent stepping stone toward gold as they refine their payment workflows, financial forecasting, and accounts payable systems.
The bronze standard award
The bronze award provides an entry-level standard for businesses working to improve their payment processes. To achieve bronze status, companies must pay 95% of all invoices within 60 days, regardless of supplier size.
While this represents the minimum standard under the Fair Payment Code, meeting this requirement still requires significant internal adjustments, such as improving invoice tracking, eliminating unnecessary payment delays, and adopting clear and transparent payment agreements with suppliers.
The Government's perspective
"The Fair Payment Code is our response to all those suppliers who begged for a more aspirational, robust and ambitious approach to changing the business to business payment culture in the UK. We want suppliers paid within 30 days..."
Liz Barclay, Small Business Commissioner
“Small businesses deserve to be paid on time, it’s as simple as that. I’m optimistic that today’s first big step [with the new Fair Payment Code) will help pave the way for real change that supports SMEs to thrive and help to grow our economy.”
Gareth Thomas, Small Business Minister
Why construction contractors should strive for the gold award
Achieving the Fair Payment Code gold award is more than a compliance milestone, it’s a strategic advantage. While bronze and silver awards improve payment practices, gold awards status sets a new benchmark, requiring contractors to pay 95% of all invoices within 30 days.
This level of financial responsibility enhances government tender eligibility, as public sector contracts increasingly prioritise fast and fair payment performance, giving the Fair Payment Code gold award contractors in the construction industry a clear competitive edge.
Beyond government contracts, the Fair Payment Code gold award boosts credibility with private clients, investors, and suppliers. Developers and financial institutions favour financially stable contractors, while suppliers are more likely to offer better pricing and prioritise service to those with a proven commitment to on-time payments. In an industry where supply chain trust is critical, being recognised as gold-standard strengthens long-term partnerships.
While reaching gold status requires proactive financial management, the benefits far outweigh the challenges. Contractors that streamline payment processes, improve procurement efficiency, and embrace digital transformation gain a lasting competitive advantage, securing more contracts and leading the way in ethical payment practices.
What does the new Fair Payment Code mean for construction?
The Fair Payment Code is more than just a set of guidelines, it directly impacts how construction contractors do business, manage cash flow, and compete for government and private sector projects.
Stricter enforcement and compliance monitoring
One of the most significant updates to the Fair Payment Code is the expanded enforcement powers granted to the Small Business Commissioner (SBC).
Under the Payment Practices Reporting Regulations (PPR), large businesses must now publish detailed data on payment timelines and performance. This change aims to improve transparency, holding businesses accountable for their payment practices and allowing suppliers to make informed decisions when choosing contractors.
The SBC has been given greater authority to investigate payment breaches and enforce penalties against companies that fail to meet payment deadlines.
Non-compliant businesses risk public exposure, which can damage their reputation and limit their ability to secure new projects. In more severe cases, failure to meet Fair Payment Code standards can result in the revocation of certification, removing a company’s ability to claim compliance as a selling point in competitive bids. If non-compliance continues, businesses may also face fines or even criminal charges, further reinforcing the importance of maintaining prompt and transparent payment practices.
The financial consequences of late payments
Delays in contractor payments directly impact the entire supply chain, creating a ripple effect that results in project delays, cash flow issues for SMEs, and increased insolvencies.
When main contractors fail to pay subcontractors on time, smaller suppliers struggle to cover their own costs, leading to knock-on effects that can halt progress across multiple projects. As subcontractors and suppliers become more selective about the companies they work with, financially unstable contractors may find it difficult to secure skilled labour or reliable material suppliers, leading to higher costs and longer project timelines.
The collapse of a number of large organisations during 2023 and 2024 left thousands of employees jobless and resulted in hundreds of millions in unpaid invoices.
These failures serve as stark reminders of the real-world consequences of late payments, not just for the affected companies but for the broader construction industry.
Supply chain transparency and the future of retentions
While the Fair Payment Code does not yet mandate reporting on retentions, future updates may require businesses to disclose retention payments in their annual financial reports.
This shift would increase transparency in subcontractor payments, helping to prevent financial disputes and supply chain instability.
As payment transparency becomes a higher priority across the industry, many experts anticipate that 30-day payment terms could become the standard in future regulatory updates. Companies that proactively align their payment policies with stricter compliance expectations will be better positioned to secure government contracts and maintain supplier trust in an increasingly regulated market.
“I think this could be a real game changer, it will give businesses a competitive advantage, credibility in the marketplace and it will set them apart from organisations that haven’t applied.”
Philip King, former CEO of the CICM and Causeway Cashflow Consultant
The Fair Payment Code is reshaping construction finance - contractors must act or risk being left behind
The new Fair Payment Code represents a fundamental shift in construction finance, moving from the voluntary, loosely-enforced Prompt Payment Code to a more robust framework with meaningful accountability. With its tiered gold, silver, and bronze awards, the Fair Payment Code establishes clear benchmarks for payment performance, with gold status requiring 95% of all invoices paid within 30 days.
As construction insolvencies continue to rise, with high-profile collapses like Buckingham Group, Tolent, ISG, and Stewart Milne highlighting the devastating impact of payment delays, contractors cannot afford to maintain the status quo. The Small Business Commissioner's expanded enforcement powers and the transparency mandated by Payment Practices Reporting Regulations create real consequences for non-compliance.
Forward-thinking construction contractors will recognise that achieving gold award status isn't merely about regulatory compliance, it delivers strategic advantages in securing government tenders, attracting better suppliers, and building stronger client relationships.
Those who act now to improve their payment processes, embrace financial transparency, and prioritise supply chain stability will set themselves apart in an ever-competitive industry.
As construction transitions toward this new payment culture, with expectations that 30-day terms could become standard in future regulations, the time to adapt is now. Contractors who delay implementation risk damaged reputation, limited business opportunities, and potential financial penalties. The Fair Payment Code isn't just changing how construction businesses pay—it's redefining what it means to be a trusted and viable contractor in the industry.
To learn how to implement these practices and gain a competitive advantage through gold, read our article: leveraging the Fair Payment Code gold award for business growth.
