UK SMEs owed over £586 billion in outstanding invoices

The average small business is owed more than £108,000 in unpaid invoices, an increase of 8 per cent since the last Business in Britain report in January 2016, with almost a third of firms (29 per cent) citing late payments as the biggest cause of cashflow problems.

The Business in Britain report, which gathers the views of more than 1,500 UK companies,  found that more than 1.5million SMEs (29 per cent) are currently owed more than £200,000 in outstanding invoices, up from 1.3million (25 per cent) in January.

The issue of late payments is likely to persist into 2017, with nearly a third (30 per cent) of businesses expecting more customers to require deferred payment terms in the next six months.

Meanwhile, British small businesses’ own a combined total of £2.6tn of assets outright, an average of almost £490,000 each. This is an increase of £18,000 per business (or 4 per cent) since the start of the year.

Businesses said they were expecting to invest an average of £1.5m into their business over the next six months, up marginally from January, suggesting they remain undeterred by recent political and economic shocks.

Awareness of finance

However, these investment plans could be being held back by relatively poor awareness of different forms of financial support available.

Only two in five (40 per cent) of firms surveyed for the report said they aware of invoice finance, and only a third (34 per cent) of SMEs were aware of asset-based lending.

Adrian Walker, managing director, head of global transaction banking at Lloyds Bank, said: “If businesses are issuing more invoices and investing in more assets, then this is very positive for them and the economy.

“But if companies are having to wait longer to be paid, and are reporting that they expect to face an even longer wait in the future, this slowing of payments could be holding businesses back from releasing critical cash to drive future growth.

“The amount of money that firms have tied up in unpaid bills and other assets is significant, and this report suggests that these sums could be unlocked if businesses were more aware of the funding options that are open to them.”

The report highlights significant differences in outstanding invoices across the UK.  Businesses on the south coast (Kent, Sussex, Surrey, Hampshire and Dorset) were owed the least on average in outstanding invoices, valuing at £80,000 each. In January, the same areas were owed the most, with outstanding invoices worth an average £109,000 per business. They also owned the least in assets, with each business owning less than £420,000 in assets outright.

Businesses in Wales, however, were owed almost twice as much, with the average Welsh SME owed £150,000 in outstanding invoices. Two in five (41 per cent) of Welsh businesses were also reported to be owed more than £200,000 in unpaid invoices. Welsh businesses’ assets were also the most valuable in the country, owning on average £682,000 in assets outright.

Walker added: “Small and medium-sized businesses are the lifeblood of the British economy but we continue to see too many of them whose growth is being held back due to a lack of awareness of the multitude of funding options available to them.”

The full report is available here