The ban is part of the Small Business Protections Bill which has been introduced to parliament as part of the “toughest crackdown on late payments in a generation”.

According to the government, late payments close 38 businesses every day.

The bill has been designed to address this with a 60-day cap on payment terms from large firms to small suppliers and mandatory interest on late payments.

However, a proposed ban on the use of withholding retention payments under construction contracts has been criticised.

These give “vital” protection to SME developers, according to Paul Rickard, CEO at Pocket Living.

“Large housebuilders can lean on the scale of their pipelines to keep contractors and supply chains in line,” said Paul.

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““Retention is often the only meaningful lever we have to ensure works are finished properly and defects put right.

“A ban would strip that lever away at the worst possible moment, with SMEs already stretched in a difficult market.”

In agreement is Sam Bensted, assistant director of policy at Real Estate:UK, who has argued the government does not understand the role retention payments play.

“These are not late payments — they are an important tool used by construction clients to ensure that projects are delivered by construction companies to appropriate safety and quality standards,” said Sam.

“A complete ban on their use not only misunderstands their intention, but also the protection they provide to smaller construction sector clients, including the very SMEs the government wants to support, as well as to the ultimate users of buildings.”