That’s according to latest figures from the Federation of Small Businesses (FSB), which found that a third of its members had suffered more late payments in the last three months of 2021 than in the previous quarter.
As a result, just under one in 10 (8%) of SMEs now report that unpaid invoices pose a direct threat to their ability to continue trading. With a total of 5.5 million small businesses trading in the UK, that puts the number of companies in jeopardy at around 440,000.
These figures heap further pressure on the government to finally take meaningful action on an issue that has already forced tens of thousands of businesses to close.
As we recently reported, the Small Business Commissioner (SBC) has just finished a consultation with the SME sector on steps small business owners would like to see to stamp out late payment culture.
We can only hope this is the start of authorities finally listening to small businesses and taking the issue seriously. But the truth is, we already know the solutions required - a mandatory 30 day time limit on ALL invoice payments, backed up with statutory fines and other punishments for any transgressions.
The fact that the number of overdue invoices is still rising proves that the current system of a voluntary 30-day ‘prompt payment code’ simply isn’t working.
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A pressure SMEs can ill afford
As the FSB points out, rising late payments are creating an unnecessary pressure that hard-up small businesses can ill afford.
The number of registered small businesses has plummeted by 400,000 over the course of the COVID-19 pandemic. Due to a range of factors that include spiralling energy costs and the ongoing fallout of Brexit on imports and exports, cost pressures on businesses have hit a seven year high. Three quarters of small businesses expect costs to keep rising.
2022 was supposed to be the year that saw the UK economy enjoy the green shoots of recovery. But there’s little optimism coming out of the SME sector right now. The FSB found confidence plummeted in Q4 2021. The majority of small firms expect their performance to worsen in the first quarter of 2022 rather than improve.
In this climate, the last thing hard-up small businesses need is large clients riding roughshod over them with a brazen disregard for payment terms. It’s time for the government to act before the country’s critical SME sector takes a hit it cannot recover from.