UK SMEs were owed £6.3 trillion in 2013

Will Green is news editor of Supply Management
21 September 2014

Each SME in the UK was owed an average £1.3 million during the last financial year, according to research.

The findings also showed total SME trade debt, made up of current invoices and overdue payments, reached £6.3 trillion in 2013/14.

The research, based on analysis of account details submitted to Companies House by more than 9,000 SMEs, was carried out by law firm Debt Guard Solicitors (DGS).

DGS found micro businesses, defined as employing up to nine people with turnover of less than £2 million, were proportionately the hardest hit. Each had an average of £68,000 trade debt, representing 19 per cent of their turnover.

Some 12 per cent of micro businesses had “dangerously high” trade debt that reached a third of annual turnover, and nearly half of these were located in London, according to DGS.

Small companies, defined as 10 to 49 employees with turnover between £2 million and £10 million, had average debt of £936,000, equal to 17 per cent of average turnover.

Meanwhile medium-sized firms, with 50 to 249 employees and turnover between £10 million and £100 million, were owed an average £3.7 million, representing 13 per cent of turnover.

The average time it took to receive payment from customers was 63 days for micro SMEs, 47 days for small companies and 40 days for medium-sized firms.

To arrive at the £6.3 trillion figure, DGS took the average debt from its sample and multiplied it by 4.9 million, the number of SMEs in the UK. The figures have been affected by rounding.

Mark Burgess, chief operating officer at DGS, said: “This research highlights there is a highly varied national trade debt picture emerging within the SME marketplace, created by unpaid and outstanding invoices. In the past SMEs have been lumped together when it comes to debt management, but it is clear that micro SMEs in particular need much greater support in this respect as they often have to wait longer for payment from larger companies.

“As the backbone of the UK economy many of these micro firms are suffering from big trade debt issues with the threat of closure a real danger. Our message to all suppliers in this position is don’t write off your debt and look at legal ways to professionally recover it, as by improving credit flow this will help put your business on a more stable financial footing.”

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