Late payments increase as overdue invoices grow by 3%

Late payment pressures intensified for businesses in the first quarter of 2026, with a growing number of companies carrying overdue invoices on their books, according to a new report from R3, the UK’s trade body for restructuring, turnaround and insolvency professionals.

The report shows that the number of overdue invoices rose to 17.48 million, up 3% on the same period last year, while 1.57 million UK businesses had overdue bills on their books.

While insolvency‑related activity – including administration and voluntary and compulsory liquidations – fell by 6% to 7,212 cases compared to Q1 2025, they rose by 9% compared to the final quarter of 2025, highlighting that financial pressures on UK businesses are intensifying at a time of economic uncertainty and rising costs.

Tom Russell, President of R3, the trade body for restructuring, turnaround and insolvency professionals, said, “Our latest Business Health report highlights an early warning sign for UK businesses, with late payment pressures continuing to build. More than 1.5 million companies are carrying overdue invoices, showing that day‑to‑day cash flow remains under real strain.

“Late payments are a significant contributor to business failure, and mounting arrears can quickly turn manageable cashflow issues into a wider crisis. With businesses also facing higher energy and fuel costs linked to global uncertainty, our members expect pressure to intensify as the year progresses.”

The government states that late payments cost the UK economy £11 billion each year and lead to the closure of 38 UK businesses every day, while announcing plans to tackle the issue.  Construction firms, already the most distressed sector, are among those hardest hit by payment delays, according to a report by the Business and Trade Committee.

Further findings from R3’s report found that late payments varied by region, with the West Midlands recording the highest number of overdue invoices (3.05 million), followed by Greater London (2.91 million) and Scotland (2 million).

In percentage terms, the sharpest rises in overdue invoices were recorded in the West Midlands (up 17% on Q1 2025), Scotland (up 9%) and the North East (up 5%).

Whilst construction remained the most distressed sector in Q1, with 1,159 insolvency‑related cases, followed by wholesale and retail (975 cases) and accommodation and food services (923 cases).

Russell concluded, “It is evident that many businesses are operating with limited financial resilience, with small and medium-sized businesses particularly exposed to the impact of late payments.

“With this in mind, business owners should prioritise credit control and seek professional advice early if they begin to struggle, rather than waiting until problems become unmanageable.”