Services sector responsible for spike in overdue invoices

11th August 2022

The UK Services sector is responsible for the biggest month-to-month spike in overdue invoices last month according to new analysis by Sidetrade.

UK Services companies saw the biggest month-to-month leap from June to July 2022 with over a quarter (26.8%) of supplier invoices issued to them being deemed overdue last month, compared to one-fifth (20.6%) in June 2022.

Other sectors that saw a month-to-month jump in July included Agriculture (up to 21.3% from 16.8% in June), Transport & Logistics (up to 19.8% from 16.7% in June), and Retail (up to 10.5% from 8.6% in June).

Sidetrade says that the data indicates possible cash flow struggles as UK companies struggle to contend with rising inflation and supply chain costs.

In addition to being the sector with the second largest month-to-month jump in July, more than one-fifth (21.3%) of invoices issued to UK agriculture companies were deemed overdue last month, the highest monthly level seen in the sector since the start of the pandemic in April 2020 when the figure stood at 25.6%.

The proportion of late payments by UK agriculture companies in July is now 4 points higher than the overall Q2 2022 average of 17.3% – which was the sector’s highest quarter since Q2 2020.

The monthly proportion of late invoices by UK Construction & Mining companies fell to 18.9% in July 2022, down from 19.9% the previous month. This drop in July seems to mark the end of a three-month trend of rising late payment ratios by the sector between April – June this year.

However, July figures still stand at 1.6 points higher than the Q2 2022 average of 17.3%, and with recent reports by S&P Global/CIPS UK Construction Purchasing Managers’ Index (PMI) of a slowdown in the sector for the first time since 2021, concerns remain.

Rob Harvey, Chief Product Officer at Sidetrade, said “Late payment trends can be a useful indicator for broader economic health. To see almost half of the industries we track in our Unpaid Invoice Tracker experiencing a rise in late payments last month, suggests that we are now beginning to see the economic toll that rising costs, higher interest rates, inflationary pressures and recessionary risks are having on UK companies’ cash flow.”

“Now with higher interest rates as announced by the Bank of England last week, and companies reportedly struggling to outpace inflation, it will be interesting to see how late payment trends evolve in the coming months, as the cost of borrowing cash rises and businesses look to find new ways to improve overall working capital management.”