More than three in five small businesses (63%) are dealing with late payment issues - and the smallest businesses are those most at risk of dealing with non-payment - according to new research from Hitachi Capital Business Finance.
With reports that 50,000 SMEs a year close their doors as a result of late payment – and with calls for legislation to protect Britain’s SME community – Hitachi Capital’s new research looked to quantify the seriousness of the late payment epidemic across UK regions and sectors. A representative sample of 1,201 business decision makers were asked to report on the invoices they had sent customers and suppliers that were due for payment at the start of June 2018.
- Only three in ten small businesses (30%) said all their invoices had been paid on time.
- 63% were dealing with late payment: 48% of respondents reported having invoices paid a week late, 46% had invoices paid a month late and 35% said they were having to wait for more than a month to have some invoices settled in full.
- Alarmingly, 29% of business leaders surveyed were dealing with non-payment issues from their clients and customers.
Who is most affected by late payment?
Smallest businesses on the edge
The old chestnut of the big firms paying small firms late appears to ring true and for small ventures it could be more than just a short-term cash flow issue. Hitachi’s research found that the smallest businesses (those with an annual turnover or less than £1 million) were those most at risk of serious non-payment. They were most likely to have invoices paid more than a month late (26%) and most likely to have bad debt risks from non-payment (25%). In total 20% of the UK’s smallest businesses said they were living with non-payment for 20% of their invoices.
Sectors most affected by late payment
The sector most affected by late payment was manufacturing, followed by small businesses in the legal sector – a sector where one might expect customers to pay on time. In contrast, decision makers in hospitality and agriculture reported the lowest levels of late payment.
| Net % dealing with late & non payment | % dealing with non payment issues | |
| Manufacturing | 81% | 37% |
| Legal | 79% | 45% |
| Transport & distribution | 76% | 28% |
| Media & marketing | 71% | 32% |
| IT & telecoms | 67% | 31% |
| Construction | 66% | 35% |
| Finance & accounting | 66% | 35% |
| Medical & health | 58% | 24% |
| Retail | 54% | 30% |
| Real estate | 53% | 23% |
| Agriculture | 50% | 17% |
| Hospitality & leisure | 45% | 21% |
Regional late payment hotspots
Regionally, small businesses in London were most affected by late payment (70%), followed by those in the South East (67%) and both the East and West Midlands (67% respectively). The urban heartlands of London and the North West were also the regions where small businesses were most likely to be facing non-payment issues (36% and 33% respectively).
Millennial entrepreneurs
In the digital age with a new generation of young people starting up their own businesses, the Hitachi Capital Business Finance research revealed that younger bosses were more likely to be experiencing late payment issues. 70% of small business decision makers under the age of 35 reported late payment issues with some invoices (70%) compared to 61% of those aged 55 or over. A sign perhaps that despite advances in technology and immediate payments that the problem of late payment could in fact be getting worse.
Gavin Wraith-Carter, Managing Director at Hitachi Capital Business Finance, commented: “At a critical moment in the economic cycle we need to ensure that small businesses continue to be the engine room to our country’s growth and prosperity. Late payment directly threatens this. We estimate there is around £50 billion 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 chasing late payments. 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.”
The research was conducted by YouGov in June 2018 among a representative sample of 1,201 small business decision makes spanning industry sectors.
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