Quicker payments would have saved 50,000 SMEs
The Federation of Small Businesses (FSB) has published a comprehensive report looking at the way small firms and the wider economy are affected by poor payment practice. The report has found that existing policy interventions have had no discernible effect on tackling problems around the UK’s poor payment culture in the last five years. Small businesses report that, on average, 30 per cent of payments are typically late compared with 28 per cent in 2011.
The impact on small businesses can be devastating. The report - ‘Time to Act: The economic impact of poor payment practice’ - shows that 37 per cent have run into cash flow difficulties, 30 per cent have been forced to use an overdraft and 20 per cent say late payment has hit profits. At the extreme end, late payments and resulting cash flow difficulties have caused businesses to fail. In 2014, if payments had been made on time and as promised, 50,000 business deaths could have been avoided, growing the UK economy by £2.5 billion - a vital uplift to UK GDP just as business confidence dips amid fears of a weakening domestic economy.
Mike Cherry, National Chairman at the Federation of Small Businesses, 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 as 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.”