Basware, a global leader in payments and spend management, and YouGov today release a survey that shows the true extent of SMEs’ exasperation with the UK’s late payment culture.
The survey of over 2,000 small businesses with less than 250 staff found that more than half support a change in the law around late payments – with six-in-10 backing the introduction of a 45-day minimum payment term. More than six times as many SMEs want new laws as don’t (61% vs 10%).
The UK economy is built on the success of small businesses – together they employ around 16 million people or 60% of the corporate workforce. The combined annual turnover of SMEs in 2017 was £1.9 trillion, over half of all private sector turnover in the UK. Yet despite the importance of SMEs to the UK economy the survey found that:
· One in four of the respondents have had their financial viability put at risk due to late payment, or payment towards the end of a term agreement. That would mean around 665,000 businesses out of the 2,658,985 SMEs in the UK have come close to bankruptcy because of payment issues.
· Some 53% of those who said their financial viability had been put at risk (which would equate to around 350,000 individuals) have been forced to use their own personal finances to keep their businesses running in the interim.
· Of those whose business was put at risk due to a late payment or payment towards the end of the payment term, 18% (an estimated 120,000 businesses) said they had been forced to put recruitment on hold.
· A further 13% (around 86,500 firms) had been forced to let staff go due to the problem.
· Across all respondents, half of those businesses saying they have experienced late payments pointed the finger at big businesses (250 employees+) as the source of the issue.
With a significant number of people employed by small businesses, the UK cannot afford for this thriving economic ecosystem to collapse. However, only a quarter of SMEs say that no bills owed to them were paid late last year, meaning up to two million firms are being routinely paid late. While there are several new options available to SMEs to help mitigate against late payments, including supply chain financing and invoice discounting, it is no wonder that so many SMEs are keen to see politicians act.
Louis Fernandes, Country Manager of Basware in the UK, said: “SMEs are the backbone of the UK economy and critical to our competitiveness through Brexit. The UK needs to take steps to help SMEs improve productivity and realise cost savings where they can. Technology will be important and we are seeing more and more firms come to us looking for help with payments automation and different financing models, but it’s clear that late payments cause massive issues for firms. SMEs need to see the government do more to help them get paid on time.”