Small Business Commissioner

Over a quarter of UK businesses are being hit by more late payments due to the rising cost of living

  • Over a quarter (26 per cent) of businesses report that late payments from customers have become more frequent as the cost of living crisis starts to impact SMEs
  • Nearly two fifths of businesses (39 per cent) have involved solicitors or take legal action to reclaim late payments
  • Barclays and the Small Business Commissioner continue their call to champion the small business community in tackling this issue and call on larger businesses who don’t pay on time to meet their obligations

Over a quarter (26 per cent) of UK small or medium-sized enterprises (SMEs) have seen the number of late payments they receive increase since the cost of living has gone up, according to new research from Barclays1.

The new findings indicate that rising prices have started to impact payments between businesses, as 16 per cent of SMEs said that they’re finding it more difficult to pay suppliers themselves because of the cost of living crisis, rising to a third in the Manufacturing (33 per cent) and the Construction & Real Estate (33 per cent) sectors.

Late payments negatively impact a business’s income, which can result in cash flow instability, and are the single biggest cause of business failure. For some businesses, this owed money might prevent new hiring opportunities or investment back into the business, as 10 per cent said that the amount they are owed in late payments could be used to recruit more staff and 12 per cent said they could expand their products or service offering, growing their business.

For some business owners, the stress of waiting on late payments has more than just an impact on their finances as over a quarter (26 per cent) said they have felt anxious or their wellbeing has suffered as a result of late payments and a fifth (21 per cent) of business owners responded that they have had sleepless nights.

However, over half (58 per cent) say they would refuse a job with a potential customer if they were known for paying late.

Small Business Commissioner, Liz Barclay, said: “It is utterly distressing to see that late payments for some are becoming more frequent. However, given the cost of living crisis, increases in material costs and staff wages, it isn’t surprising as many firms are delaying payments until they themselves are paid.

“The biggest companies with the deepest pockets must realise that if they delay payments or offer unfair extended payment terms the whole of their supply chain suffers. The talented people who keep them supplied with goods and services from which they make their money will go to the wall and struggle with mental health issues.

“It’s expensive in time and money to find new suppliers. Now more than ever bigger customers must treat smaller suppliers fairly and #PayDontDelay. Call us for help before taking legal action.”

Hannah Bernard, Head of Business Banking at Barclays, said: “The past two years have been some of the most challenging in living memory for businesses. Along with consumers, SMEs now face the bite of the cost of living crisis.

“It’s more important than ever for businesses to have confidence in their cash flow, which is why we’re working with the Small Business Commissioner to continue our call for higher standards, and urging larger businesses to make good on their commitments and pay their suppliers on time.

“We need to put an end to late payments to unlock the full potential of the nation’s hard working businesses. Many could use the money owed in late payments to reinvest and grow, generating a boost for the wider economy.”

Making sure customers pay on time can be difficult, as over a third of businesses (39 per cent) said that they had involved solicitors or taken legal action to reclaim late payments. However, this is less common among smaller businesses, with only 31 percent of businesses with turnover less than £2m responding that they had taken legal action, compared to half (51 per cent) of businesses with turnovers above £2m.

Businesses can claim late payment interest and compensation if a payment deadline is missed. However, whilst three fifths of businesses (60 per cent) surveyed say they’re aware that they can take action, only 16 per cent had done so, with 26 per cent unaware that this was an option. Through the Prompt Payment Code (PPC) businesses are also able to check the payment terms companies have committed to.

Over the last few years, Barclays has announced a number of partnerships in their push to give businesses alternative methods of finance and protection for their enterprises and their cash flow, including MarketFinance and Nimbla, which provide invoice financing and invoice insurance respectively.

To find out more about Barclays support for businesses visit: https://labs.barclays/business-health-hub  

To find out more about the Prompt Payment Code, visit: www.smallbusinesscommissioner.gov.uk/ppc/

Notes to Editor:

Research conducted by YouGov of 500 decision makers in small and medium sized enterprises with a turnover of less than £25m from April to May 2022.

Barclays is a proud signatory of the Prompt Payment Code.

Barclays money management hub: https://www.barclays.co.uk/business-banking/money-management/

For more information:

Barclays press office: George Shorrock – george.shorrock@barclays.com – 07384 433593

Barclays press office: Isabel Allanwood – isabel.allanwood2@barclays.com –  07881 318 272

About Barclays

Barclays is a British universal bank. We are diversified by business, by different types of customer and client, and geography. Our businesses include consumer banking and payments operations around the world, as well as a top-tier, full service, global corporate and investment bank, all of which are supported by our service company which provides technology, operations and functional services across the Group.