Part one: key construction and engineering insights from the King’s Speech 2026 – core commercial changes

The King’s Speech 2026, delivered on 13 May, outlined the upcoming legislative agenda and priorities for the UK.[1] Many of the proposed measures will have direct implications for the construction and engineering sector, alongside broader economic impacts.

In this mini‑series, we highlight the developments and opportunities relevant to developers, contractors, consultants and their insurers. In part one, we build upon our earlier commentary on proposed changes to payment practices and outline the points likely to drive contractual or commercial change.

General landscape

The Speech highlighted the current global context, recognising the impacts and risks arising from geopolitical instability, including the conflicts in Ukraine and the Middle East. [2] It acknowledged that the UK’s economic security may be impacted as a result.

Additionally, strengthening trading relationships was highlighted as key to supporting economic security and growth, while also helping to ease pressures on the cost of living. This is reflected in measures aimed at facilitating trade, improving payment practices, securing investment and supporting “world class infrastructure”.[3]

Core commercial changes

The Small Business Protections (Late Payments) Bill (formally named the Commercial Payments Bill[4]) is intended to address late and poor payment practices, which are estimated to cost the UK economy £11 billion annually and contribute to the closure of approximately 38 businesses daily. [5]

For the construction sector, where cash flow is critical, the proposals are significant and include:

• Mandatory 60 day maximum payment terms for larger businesses paying smaller suppliers.
• Mandatory statutory interest on late payments of 8% above the Bank of England base rate.
• The introduction of a time limit for disputing invoices.
• Strengthening transparency and oversight by requiring boards or audit committees of persistently late-paying large companies to report on payment performance and actions.
• Expanding the Small Business Commissioner’s powers to investigate businesses suspected of poor practices, adjudicate disputes between businesses and fine those businesses persistently failing to comply or making payments late.
• Banning the practice of deducting and withholding retention payments under construction contracts (Sections 113A-113F of the Bill).

The measures aim to influence behaviours and support cash flow on projects. They apply to domestic transactions (amending the Construction Act and other legislation).

Retention relates to a percentage of the contract sum being withheld as a form of security for the client. The implications of the plans to restrict this practice is unclear, particularly given wider sector and insolvency risks. The government had previously indicated further consultation with industry stakeholders before making a final decision on implementation, including working with organisations to develop approaches to minimising defects and the financial services sector on surety options.

The proposals are likely to influence parties’ future contractual and commercial arrangements, potentially by increasing reliance on alternative security mechanisms such as performance bonds or parent company guarantees. We may also see creative drafting attempts in contracts to try to avoid falling foul of the “deducts or retains” wording currently included in the Bill.

We will issue further commentary as the Bill progresses through Parliament but please see our previous article for more information. In the meantime, businesses at all tiers of the supply chain may wish to review their standard form contracts, governance and payment processes, and broader risk management strategies, in anticipation of these legislative changes.

Other updates

The Regulating for Growth Bill aims to support economic growth, reduce unnecessary regulatory burdens and enable innovation (reflecting the need to keep pace with evolving technologies and business models). This may give regulators, such as the Environment Agency and the Health and Safety Executive, powers to prioritise growth and allow businesses to test new products and technologies more efficiently. For construction businesses, this could support investment in modern methods of construction.

The Competition Reform Bill seeks to promote effective competition by streamlining certain regulatory processes and ensuring markets function efficiently for both businesses and consumers.

The European Partnership Bill focuses on unlocking new trading and investment opportunities, including strengthening links to the European Union and reduced administrative barriers. This may have potential implications relevant to the energy sector, i.e. electricity and emissions trading.

Sector-specific implications

In part two, we will consider the Bills relating to infrastructure and digital. As all of these proposals progress through Parliament, it will be important for businesses to monitor developments closely and assess their potential impact. In the meantime, contractors and consultants may wish to begin reviewing their contracts, governance and payment procedures to ensure they are well positioned for forthcoming changes.

Later parts of this series will examine further key areas, including ESG, energy and building safety.

Please contact Andrew Croft, Nadir Hasan or Kayleigh Rhodes should you wish to discuss any of the points covered above.

[1] The King’s Speech 2026 – GOV.UK, published 13 May 2026

[2] THE KING’S SPEECH 2026 Briefing Pack, Prime Minister’s Office, published 13 May 2026 – ‘Introduction’.

[3] This reference is expressly included in the King’s Speech

[4] Commercial Payments Bill [HL], UK Parliament, 19 May 2026. On 19 May, the ‘Largest crackdown on late payments in over 25 years as landmark Bill enters Parliament’ press release confirmed the introduction of this Bill to Parliament.

[5] THE KING’S SPEECH 2026 Briefing Pack, ‘Small Business Protections (Late Payments) Bill’, page 19. This is based on research by the Department for Business and Trade published in July 2025.