Late payments to small businesses exceed £33 billion

As if small businesses weren't facing enough difficulties trying to survive and prosper in a struggling British economy, late and unpaid bills owed to them are at an all-time high, it was revealed today.

The electronic payments company Bacs (Bankers' Automated Clearing Services) calculated that small and medium enterprises (SMEs) are owed a total of £33.6 billion. This represents a 10% increase since last November, and the highest figure since records began four years ago. Some 861,000 firms are experiencing late payments.

Worst offenders are large businesses, who are responsible for almost half of late payments. Worst affected is the retail and distribution sector, which is owed £16.6 billion in total. SMEs are owed £39,000 on average and are left waiting two months for payment, Bacs reports, which is enough to cause business owners considerable worry about the survival of their businesses. The most frequent excuses offered for delays are issues relating to the authorisation of payments or the processing of payments through internal systems.

With banks reluctant to lend despite bailout funds and quantitative easing packages implemented by the government, these developments highlight further the challenges faced by companies in the stagnant economic climate. Analysts see the squeeze on finance for small businesses as a hindrance to job creation and economic stimulus.

Mike Hutchinson, head of marketing at Bacs, noted: "The issue of late payment is continuing to get worse for SMEs in the UK at a time when they need to be able to plan ahead for growth and ensure a strong cash flow". "This issue not only hits the business but owners are reporting how it puts them under great stress personally, which has further negative repercussions".

Small and medium-sized companies have found it hard to secure credit in recent times. Economists see the lack of finance for SMEs as one of the main obstacles to greater investment and job creation. The economy grew 0.5% in the last quarter, it was announced at the start of November, but this news has been received with caution and a number of caveats. The grim outlook for manufacturing levels has led analysts to warn of possible contraction in the final quarter of 2011.

Today's revelation comes after a report from the Institute of Chartered Accountants in England and Wales highlighted companies' concerns that the UK is 'less business friendly' now than a year ago. SMEs, vital to the UK economy, will once again be looking for intervention to aid their own survival.

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Keith McDonald
Which4U Editor