Small businesses ‘held back’ by £112bn of late payments
Small and medium-sized businesses (SMEs) are owed some £112bn in late payments, new research has suggested, with buyers “holding back” UK growth.
Nearly 5.5m companies with fewer than 250 employees and modest revenues are seen as the “backbone” of the UK economy and key to unlocking growth.
But new research by the Centre for Economics and Business Research (CEBR) has suggested that the UK’s smallest firms are owed an average of £42,000 in overdue invoices.
Persistent late payments, as found in an analysis of 1.2m anonymised invoices issued by HR software platform Sage, which commissioned the report, are “choking cash flow[s]” and stopping investment.
The UK government has made delivering growth a key mission, with agreements on pension fund investments and reforms to the UK immigration system highlighted as key policies to get the economy to bounce back.
Business secretary Jonathan Reynolds has opened a consultation on late payments to help get cash flowing into businesses as part of efforts to boost UK growth.
“This isn’t just an inconvenience, it’s holding back 5.5 million SMEs which are the backbone of the UK economy,” Reynolds said in response to the new report.
“This government is listening and taking decisive action to create an economic environment that allows businesses to plan, invest and grow.”
CEBR’s head of economic insight Christopher Breen said problems around late payments had deteriorated over the last three years.
“While payment times are falling slightly, it’s not enough to offset the rising value of overdue invoices,” Breen said.
“With the average late invoice now comparable to the typical cash a small business holds, this issue is withholding capital that could be used to invest or build resilience.”
Growth depends on technology
Industry bodies including the Federation of Small Businesses and Enterprise Nation have called on the government to roll out digital strategies at a faster pace in order to reduce late payments by up to 20 per cent.
The use of artificial intelligence to spot invoice errors and e-voicing could help accelerate UK growth, business leaders told parliamentarians on Wednesday.
Derk Bleeker, Sage’s chief commercial officer, said that further technology will radically reduce costs as time spent on admin would drop.
“It’s clear that too many small businesses continue to be held back by outdated systems and slow payments, but this is a fixable problem,” Bleeker said.