The late payment crisis is getting so bad for UK small businesses that 17% of business owners say they are forgoing paying themselves a wage so they can pay their staff on time. This rises to 27% of small businesses that say they are already struggling to survive.
New research from Hitachi Capital Business Finance has revealed that the majority of small business owners (52%) are experiencing pain because their customers and suppliers are not paying their bills on time. At a time when there are calls for the Government to do more to tackle the late payment crisis that hits small businesses particularly hard, the Hitachi Capital research reveals that 63% of SMEs are dealing with late payment and this is having a profound impact on their ability to conduct business.
The research shows that:
- More than two in five small businesses that were struggling to survive said they were unable to pay their suppliers on time (43%). A further 29% said that late payment issues was having an adverse a knock-on affect on their long-term relationships with suppliers and customers.
- Chasing and covering late payments was also taking up unnecessary time and money. More than a quarter of respondents (26%) said they had wasted time and legal fees chasing up late payments, diverting significant time from running their business.
- With cash flow and cost control a top issue for small businesses over the summer months, almost a third of small businesses polled (31%) said they had incurred bank charges and fees for having to secure bridging finance or short-term borrowing to cover the black hole left by late payment.
- Those respondents that said their business was struggling to survive were twice as likely to get behind with HMRC payments as a result of late payment (23%) – and they are almost three times as likely as the UK average to say they had been forced to make staff redundant (14%).
Gavin Wraith-Carter, Managing Director at Hitachi Capital Business Finance, commented: “The industry and policy makers have been aware of the late payment issue for some time but our new research offers insight on its impact on small businesses. It’s gone well beyond being an inconvenience: late payment is putting jobs at risk, damaging the supply chain – and when small business owners have to sacrifice their own monthly pay check you know the pain is really hitting home.”
“Hitachi Capital Business Finance has been working with the small businesses community for more than 30 years and, from we see, the problem of late payment seems to be getting worse. Uncertainty around Brexit is creating caution, which in many sectors has had a ripple effect through the supply chain. Whilst Hitachi Capital can’t solve the late payments issue, we can help small businesses to anticipate it: to plan ahead, to reappraise their financial commitments so their cash flow is less pressurised – and to cope with the sudden shockwaves that late payment can cause their business.”
The impact of late payment on small businesses comparison between small businesses predicting growth and those struggling to survive
(Base: Small businesses that had experienced late payment in the last three months)
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UK total
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Businesses predicting growth
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Businesses predicting they would struggle to survive
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We incurred bank charges/ short term borrowing
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32%
|
40%
|
31%
|
|
We wasted time/ legal fees trying to get a due payment
|
31%
|
22%
|
26%
|
|
We were unable to pay my suppliers on time
|
31%
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31%
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43%
|
|
It has had a knock on affect with our relationship with other suppliers and customers
|
28%
|
32%
|
29%
|
|
I won’t be able to pay myself so I can pay my staff
|
17%
|
19%
|
27%
|
|
We were/ will be late paying our tax bills to HMRC
|
12%
|
9%
|
23%
|
|
We have had to to delay a marketing campaign for our business
|
10%
|
22%
|
11%
|
|
We have had to delay plans to hire new people
|
8%
|
18%
|
7%
|
|
We had/ will have to lay staff off
|
5%
|
14%
|
14%
|
Small business sectors most affected by late payment
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Legal
|
44%
|
|
Manufacturing
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37%
|
|
Transport & Distribution
|
36%
|
|
Media
|
34%
|
|
Construction
|
33%
|
|
Finance & Accounting
|
29%
|
|
IT & Telecoms
|
26%
|
|
Education
|
25%
|
|
Health
|
23%
|
|
Agriculture
|
23%
|
|
Retail
|
21%
|
|
Real Estate
|
17%
|
|
Hospitality & Leisure
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14%
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