Despite attempts by the government to enforce a code for prompt payment and plans to appoint a Commissioner to oversee business rows, the proportion of UK SMEs suffering from the chronic issue of late payments is rising, research has shown.
The Bibby Financial Services SME Confidence Tracker has found that the number of UK SMEs suffering from late payments has jumped by nine percentage points from Quarter 2 2014 to Quarter 2 2015, with 51% of businesses waiting more than 30 days for payment.
On a regional level, SMEs in the West Midlands and Yorkshire and Humberside are currently suffering the most from the plague of late payments. The proportion of SMEs suffering from late payments doubled in the North East from Q2 2014 to Q2 2015.
SMEs in the construction sector suffer the most from late payments, with 55% of SMEs having to wait over 30 days to be paid, up by 11 percentage points since Q2 2014. Construction is closely followed by manufacturing and wholesale as the top sectors facing late payments.
David Postings, UK chief executive of Bibby Financial Services, said: “Despite efforts by the government to tackle the late payments issue, the scale of the problem is increasing at an alarming rate. The number of SMEs waiting over 30 days to be paid is on the rise, while in some regions twice as many SMEs are affected by this issue, compared to this time last year.
“All too often SMEs are faced with the choice of accepting crippling payment terms or losing out on business. This issue is particularly brutal in the construction industry where large firms have been known to withhold payment for so long that the SME sub-contractor goes out of business.
“In April we will see new legislation naming and shaming businesses with the worst records. While we will have to wait and see the effect of this, more can be done now. There needs to be a change of culture, where larger businesses treat small businesses fairly and view them as an extension of their own business.”