'Alarming' rise in SMEs suffering late payment

27 August 2015

The proportion of UK SMEs being paid late is rising, despite government attempts to enforce a code of prompt payment, a study said.

The Bibby Financial Services SME Confidence Tracker has found the number of UK SMEs suffering from late payments, defined as longer than 30 days, has risen by 9 per cent between the second quarter of 2014 and the second quarter of this year.

Of the 1,011 businesses surveyed, just over half had to wait more than 30 days for payment, it said. A quarter waited between 31 and 45 days, 20 per cent between 41 and 60 days, and 6 per cent between 61 to 100 days.

The West Midlands, Yorkshire and Humberside, and the North West and were the regions that suffered most from late payments, although the other regions were not far behind. A tenth of respondents in Yorkshire and Humberside said they had to wait between 61 and 100 days for payment.

In the North East, the proportion of SMEs being paid late doubled during the period. SMEs in the South East and South West also saw a substantial increase in the proportion of businesses paid late, the data found. The proportion of SMEs getting late payments in Scotland decreased over the period.

SMEs in the construction sector suffered the most from late payments, with 55 per cent waiting more than 30 days, up by 11 percentage points since quarter two 2014. This is followed by the manufacturing and wholesale sectors.

Bibby Financial Services UK chief executive David Postings said despite efforts by the government, the scale of the problem was increasing at an alarming rate.

“The number of SMEs waiting over 30 days to be paid is on the rise, while in some regions twice as many SMEs are affected by this issue, compared to this time last year,” he said.

“All too often, SMEs are faced with the choice of accepting crippling payment terms or losing out on business. This issue is particularly brutal in the construction industry where large firms have been known to withhold payment for so long that the SME sub-contractor goes out of business.”

In April we saw new legislation naming and shaming businesses with the worst records. While we will have to wait and see the effect of this, more can be done now. There needs to be a change of culture, where larger businesses treat small businesses fairly and view them as an extension of their own business.”

The SME Confidence Tracker surveys over 1,000 of the UK’s small and medium sized businesses on a quarterly basis. The study charts the confidence of business owners and senior decision-makers managing businesses with an average turnover of £1.2 million.

Central London and Cheltenham
Salaries: Central London: £48,305 - £56,163/Cheltenham: £45,341 - £53,023
Central London and Cheltenham
Salaries: Central London: £38,656 - £43,186/Cheltenham: £35,736 - £40,011
CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates