Two thirds of UK SMEs are of the opinion that there is a culture of slow payments in the UK, with the problem particularly acute in London (73%), the South West (72%) and Northern Ireland (87%). The results were obtained from the Close Brothers Business Barometer, a quarterly survey that questions over 900 UK SME owners and senior management across a range of sectors and regions.
“Late payments are a very real issue for SME business owners,” said Neil Davies, CEO, Close Brothers Asset Finance. “In some cases directors are having to defer their own salaries, increase their overdraft or pay their own suppliers late to ensure they remain liquid, causing the vicious circle to continue.
“This is clearly a national issue that spans both regions and industries. For example, 78% of Transport firms are affected by this issue, along with of 74% Manufacturing businesses and 73% of Printers.”
The effects of late payments are multiple, ranging from damage to the supply chain and business reputation to impacting credit ratings and consequently the ability to access further funding.
“We should also not forget the very real human impact because, in many cases, the ability to pay staff in full and on time is a consequence of late payments,” continued Neil.
One in four firms in the UK have been forced to seek legal advice because of slow payments, while in the Republic of Ireland the figure is significantly higher at 41%.
“In the sectors we serve the figures are, in most instances, higher than the national average,” said Neil. “Construction (30%), Engineering (38%), Manufacturing (37%) and Transport (33%) all track higher than the rest of the UK.”
Not only are many SMEs seeking legal advice, but 74% don’t feel that suitable legislation exists in support of SMEs to counteract slow payment by debtors, with firms in the East (85%) and West (84%) Midlands feeling particularly strongly about this issue.
“What these results confirm is that late payments are not merely a regional or sector issue, but one that is felt across the SME community,” said Neil.