Late payments increase 49.3%

New analysis by FreeAgent has found that late payments in the UK have increased by 49.3%, with the average late payment rate now higher than it was during the same period the previous year (43% in 2022-2023).

Late payments are also higher than it was during the 2020 calendar year (46%), which suggests that the issue is becoming a more prevalent problem for small business owners in the post-Covid and cost-of-living crisis era.

Analysis of invoices sent by FreeAgent’s small business customers between June 2023 and June 2024 has found that (62.4%) of invoices in Northern Ireland’s SME sector were paid late – the worst affected country in the UK. This is up from 55% the previous year.

Looking at the national picture, three in five invoices sent by small businesses in Northern Ireland in the past year were paid late – up by 55% from the previous year.  Wales (48%) and Scotland (48.5%) have the lowest rates of late payment, closely followed by England (49.3%). In contrast, Northern Ireland is the worst nation in the UK for late payment, with close to two-thirds of invoices sent over the past 12 months paid late.

Belfast is the city worst affected by the late payments seeing 62.4% of invoices sent during the past year paid late.

Roan Lavery, CEO and co-founder of FreeAgent, said “Maintaining a healthy cash flow is the number one priority for anyone running a business. However, the vast majority of small businesses simply don’t have the luxury of being able to absorb late payments into their accounts – they need to get paid promptly to keep themselves afloat.

“It’s therefore very concerning to see that the level of late payment in Northern Ireland has increased in recent years, and that nearly two thirds of invoices in the country were not paid on time over the past 12 months.

“This isn’t just a case of payments coming a few days or weeks late, as some of these invoices take months to settle up or – in some cases – won’t be paid at all. Looking across the country’s five million-strong small business sector, it’s clear to see just how big of a concern this is for the UK.

“Our economy remains in a fragile state, with many small businesses still feeling the impact of major disruption caused by the COVID-19 pandemic and the cost-of-living crisis, so it’s more important than ever to ensure that SMEs are protected and supported. I hope, therefore, that our new government will commit to bringing in new legislation or putting more resources into the Small Business Commissioner’s remit, so that the chronic issue of late payment can be properly tackled.”

A separate survey of small business owners recently conducted by FreeAgent has also revealed how SMEs feel about the issue of late payment in the UK. It found that around a quarter (24.6%) of respondents said they had, at some point, felt the future of their business was in jeopardy because they were not getting paid on time.

The survey also revealed that more than half (55.4%) of respondents felt the Small Business Commissioner should have greater powers to tackle the late payment problem, while 46.1% believed that the Prompt Payment Code (PPC) should be made mandatory for all businesses to follow.

In contrast, 16.7% said they thought the PPC should only be mandatory for large businesses with more than 250 employees, while 16.5% said they thought more companies should be incentivised to join the PPC rather than making the scheme mandatory.