Despite news headlines painting a rosy picture of economic health, there appears to be an underlying culture of late payments, which is steadily getting worse and costing SMEs an estimated £67.4bn.
Late payments can be a real headache for business and particularly SMEs who rely on prompt payment to survive and continue trading. Yet the amount owed to businesses of this size has risen by 8% this year alone even though the UK economy appears to be growing and the previous recession has now slipped into memory.
The problem of late payment has however got worse since 2011 with the amount owed to SMEs rising 36% from £49.5bn to 67.4bn. The industry sectors most likely to be affected by late paying customers are manufacturing and construction with the amount owing accounting for 16% of the construction sector’s entire annual turnover and this is according to what has been reported. Not all these businesses file detailed accounts.
The figures are concerning with manufacturing and construction the sectors most vulnerable to economic downturns. Research by AFBA found that businesses were waiting an average 72 days to get paid, which is also a significant increase on the 61 days reported back in 2009.