The late payment problem is getting worse and is now threatening to destroy thousands of small businesses, according to a survey carried out by the Federation of Small Businesses (FSB).
The study of more than 1,200 business owners found that one in three businesses (30%) have seen late payment of invoices increase over the last three months, with a further 8% experiencing other forms of poor payment practice.
As a result, nearly one in ten (8%) say late payment is now threatening the viability of their business.
Latest government statistics show that there are an estimated 5.5 million small business in the UK – a figure which fell by 400,000 over last year’s lockdowns. The new FSB study suggests that a similar number of firms (440,000) could be forced to close again this year due to late payment alone.
Most small businesses (78%) say costs are rising. The figure is at a seven-year high.
Inputs are most commonly cited as a primary cause of that increase, with half (49%) of those surveyed flagging it as a main driver of higher outgoings. Fuel (46%) and utilities (45%) were the second and third most highlighted primary causes of rising costs respectively. All figures are at their highest levels since Q4 2014.
Elsewhere, with full import checks and rules of origin requirements now in place for firms which do business in the EU, the bulk (74%) of small exporting firms report that international sales were flat or falling over the past quarter.
Close to one in four (38%) of these firms report a decrease in exports.
FSB National Chairman Mike Cherry said: “The small business community diminished in size over the past year and, unless action is taken now to tackle the challenges it faces, history is set to repeat itself.
“After another frustrating festive season, small firms are facing flashpoint after flashpoint. On top of that, operating costs are surging – many will soon be trying to strike energy deals without the clout of big corporates or the protections afforded to consumers.
“Late Payment was destroying thousands of small businesses even before the pandemic hit – the pandemic has made matters worse.
“Every big UK corporation should have a non-executive director on its board with direct responsibility for payment culture. And every big business and government organisation should be abiding by the prompt payment code: 30-day payment terms are not a nice to have, they’re the norm for those who are committed to environmental, social and governance best practice.
“If this government is serious about levelling-up, it needs to get serious about helping community businesses struggling to make ends meet as costs surge.”
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