Late payment puts half of SMEs at risk of failure

11 December 2018

UK SMEs are owed on average more than £80,000 in late payments – up 25% on last year, according to research.

The study by Dun & Bradstreet found that at any one time over the last 12 months SMEs were owed an average of £80,141. SMEs in London reported that the average overdue payment was even higher, at £107,776. 

However, in contrast to the widespread impression that large companies are the worst offenders, respondents reported more or less equal numbers of late payments from large businesses, fellow small businesses and the public sector.

This has led to consequences such as cash flow difficulties, reported by 31% of respondents, delayed payments to suppliers (28%) and reduced performance (22%). 

Half of business leaders (48%) believe overdue payments puts their business at risk of failure while 15% have used their own savings or assets to cover the shortfall. Almost two thirds (63%) of respondents believe financial penalties should be put into place to tackle late payments and 62% say legislation should be enacted.

Other difficulties facing SMEs included recruiting adequate talent, a problem faced by 35% of respondents, adoption of new technology (26%) and the ability to deal with increased regulations such as the General Data Protection Regulation (20%).

Nearly 20% of UK SMEs are less confident in their future financial success than last year and 32% of respondents had considered leaving the UK to increase their chances of success. Overall small-business confidence has dropped by 19% over the last year. 

Some 502 managers in UK SMEs within the manufacturing, professional services, retail, health and education sectors were surveyed as part of the research.

Three quarters (75%) of respondents see recruitment as having an impact on future growth while 41% believe Brexit could negatively affect their ability to recruit the right talent in the future. 

Brexit was at the heart of many concerns among respondents, with 64% saying the outcome of negotiations is most important factor affecting their success. Two fifths (40%) said Brexit had significantly slowed growth, while 37% had been forced to cancel or postpone plans in the last 12 months because of the referendum result. 

Evaluating the impact of Brexit on the business is a top priority for 31% of SMEs and 69% of respondents had been affected by the fluctuating value of the pound. 

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