A new report by the Federation of Small Businesses (FSB) claims that existing government policies have had no discernible effect on tackling what it calls the UK’s ‘poor payment culture’, with small businesses reporting that, on average, 30% of payments are typically late, compared with 28% in 2011.
The report found that 37% of small businesses surveyed have run into cash flow difficulties due to late payments, 30% have been forced to use an overdraft and 20% say late payments have hit profits.
In extreme cases, late payments have caused businesses to fail. The FSB claims that in 2014, if payments had been made on time and as promised, 50,000 business deaths could have been avoided. This would have meant growing the UK economy by an extra £2.5 billion.
Mike Cherry, National Chairman of the FSB, said: ‘Uniquely, the UK now risks having a business culture where it is acceptable not to pay SMEs on time. Based on an imbalance of power between large companies and their small suppliers, this now has a chilling effect right across the economy. It’s distressing to hear from our members that in 2016 the average value of each late payment now stands at £6,142.
‘Small businesses have to run a tight ship with their cash flow, and . . . they struggle with increasing business costs on one hand and an uncertain domestic economy on the other. They should not also have to struggle with the stress, time and money required to chase overdue payments from corporate giants.’