£50bn ‘locked up in late payments’

17 August 2018

Around £50bn is “locked up in late payments”, negatively impacting the UK's small business community, a survey has found.

Research by Hitachi Capital Business Finance found nearly two-thirds (63%) of small businesses are currently experiencing late payment issues. It said firms with an annual turnover of £1m or less were most at risk of serious non-payment.

The firm surveyed more than 1,200 businesses about invoices sent to customers and suppliers that were due for payment at the start of June 2018.

Hitachi Capital managing director Gavin Wraith-Carter said that late payment “directly threatens” small businesses, which are the “engine room” for the UK’s future economic growth.

“We estimate there is around £50bn of cash locked up in late payments, and this disproportionately affects the small business community, not to mention the valuable time and resources small business divert from the production line to needlessly chase late payments,” he said.

“It’s time for change, and we fully support policy changes that protect the welfare and economic growth of small businesses – and by implication – the country at large.”

Of the firms sampled, 63% said they were dealing with late payments. Almost half (48%) reported their invoices were paid a week late while 35% said they waited more than a month for some invoices to be settled in full.

Only three in 10 (30%) small businesses reported their invoices had been paid on time.

A similar number (29%) of business leaders said they were experiencing non-payment issues from clients and customers.

The research found the manufacturing sector was most affected by late payments, with 81% of small businesses experiencing late or non-payment.

Almost four in five (79%) small businesses in the legal sector experienced late and non-payment of invoices.

Businesses in hospitality and agriculture reported the lowest levels of late payment, at 45% and 50% respectively.

The data also showed regional variations. London small businesses are the worst affected, with 70% of small businesses impacted by late payments. SMEs in the Southeast, East Midlands and West Midlands reported 67%.

Age was another contributing factor, according to the research, with younger bosses more likely to report late payment issues. Seven in 10 (70%) small business leaders under the age of 35 reported late payment issues compared to 61% of those aged 55 or over.

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