Late payments driving 14,000 businesses to close every year

Late payments are forcing an estimated 14,000 businesses to close every year, equivalent to 38 closures every single day, as cash-strapped firms struggle to survive unpaid invoices, according to new analysis from Funding Circle.

Construction is the sector most exposed, with over 2,100 firms estimated to have closed in 2024 due to delayed payments, driven by long payment chains and thin margins. This is followed by Professional services (1,855), wholesale and retail, and administrative sectors, which also face significant risks.

The impact is uneven across regions: London leads with more than 3,000 late-payment-related closures, followed by the South East (1,950) and North West (1,500). Micro and small businesses, already under pressure from rising costs and tighter margins, are disproportionately affected, losing an average of 86 hours a year chasing payments – a national productivity drain of 133 million hours.

The data shows that 28% of firms are affected by late payments each year, impacting more than 1.5 million businesses nationwide. Collectively, UK businesses are owed around £26 billion in overdue payments at any given time. For the average affected business, this means waiting on £17,000 in unpaid invoices – cash that could otherwise be used to pay staff, invest in growth, or keep day-to-day operations running smoothly.

Research finds that micro and small businesses bear the greatest burden. Late payments account for 4.61% of annual turnover for micro businesses and 1.47% for small businesses. While the absolute value of late payments is typically lower for smaller firms, a far greater proportion of their turnover is tied up in unpaid invoices.

Construction has emerged as the sector most at risk, with over 2,100 firms estimated to have closed in 2024 due to delayed payments, driven by long payment chains and thin margins. Professional and technical services, wholesale and retail, and administrative and support services also feature heavily.

Late payments don’t just restrict cash flow – they also drain productivity. UK businesses lose an estimated 133 million staff hours each year chasing overdue invoices, with affected firms spending an average of 86 hours annually pursuing money they are already owed. 

That lost time translates into almost £7 billion (The average labour cost estimate is £16.92 per hour) a year in direct costs to businesses, factoring in staff time, legal fees, debt collection, and emergency financing used to plug cashflow gaps.

Businesses struggling with late payments reportedly face higher closure rates than similar firms without such issues. In 2024, around 280,000 businesses closed in the UK, meaning roughly 1 in 20 of these closures were likely caused directly by late payments.

London recorded the highest number of closures tied to late payments, with more than 3,000 businesses estimated to have failed as a result, followed by the South East (1,950), North West (1,500) and East of England (1,350). These regions account for a disproportionate share of late-payment-driven business failures, underscoring how deeply the issue is embedded in the UK’s commercial landscape.

With 84% of late payments coming from UK customers, the research highlights a clear opportunity for economic improvement through better payment practices. The analysis suggests that reducing poor payment behaviour by just 10% could deliver nearly £1 billion in economic benefits every year through fewer closures, higher investment and improved productivity.

Funding Circle says that for business owners, late payments aren’t just a temporary cash issue – they increase risk, reduce resilience, and limit opportunity. Every hour spent chasing invoices is time not spent growing the business, hiring staff, or improving products and services. Payment uncertainty makes planning harder and undermines confidence in future investment.FlexiPay from Funding Circle gives business owners the flexibility to manage cash flow, ensuring that even if invoices are delayed or unpaid, they have the funds to keep operations running smoothly.

	Businesses (Total)	Estimated closures due to late payments in 2024
Construction	870,000	2,140
Professional, scientific & technical	755,000	1,855
Wholesale & retail	559,000	1,370
Admin & support services	495,000	1,215
Other services	367,000	900
Health	356,000	875
IT & communication	338,000	830
Transport & storage	313,000	770
Education	299,000	735
Arts, entertainment & recreation	280,000	690
Manufacturing	247,000	605
Agriculture	212,000	520
Hospitality	148,000	365
Property	143,000	350
Finance & insurance	86,000	210
Mining & utilities	31,000	75
Total	5,700,000	14,000

Region	Business deaths in 2024 (thousands)	Estimated closures due to late payments
London	61	3,050
Yorkshire and the Humber	20	1,000
North West	30	1,500
North East	8	400
West Midlands	24	1,200
Wales	10	500
East Midlands	19	950
East of England	27	1,350
Scotland	16	800
South West	21	1,050
South East	39	1,950
Northern Ireland	5	250
UK total	280	14,000