UK small business sector still plagued by late payment issues

UK freelancers and small business owners continue to be plagued by the problem of late payment, according to new research by cloud accounting software company FreeAgent.

Analysis of over 2 million invoices sent by FreeAgent customers between January 2019 and June 2020 has revealed the startling impact of late payment on the UK’s small business sector – with just half (54%) of invoices sent over the past 18 months paid on time.

The research shows that Liverpool is the area worst affected by late payment – with 66% of invoices sent during the past 18 months paid late – closely followed by Sheffield (63%) and Eastern Central London (62%). In contrast, Ipswich is least affected by late payment, with just 7% of invoices sent by small businesses in the city paid late.

The data also revealed that the total number of invoices paid to small businesses over the April-June 2020 lockdown period compared to previous quarters has plummeted by a third (33%). In addition, the sector experienced a slight increase in late payment over the same period, with just 51% of invoices paid on time from April-June. FreeAgent says this highlights just how badly affected the small business sector has been by the pandemic, and why the issue of late payment needs to be addressed as an equal priority to wider Covid-19 support.

Worst areas for late payment:

City

Percentage of invoices paid late

Liverpool

66%

Sheffield

63%

London EC (Eastern Central)

62%

Least affected areas for late payment:

City

Percentage of invoices paid late

Ipswich

7%

Manchester

10%

York

25%

Leeds

32%

Separate research conducted by FreeAgent also suggests that the small business sector is becoming increasingly frustrated with the government’s response to the late payment issue. In a survey of more than 1,200 UK small business owners, just 6% of respondents said that they thought elected officials were taking late payment for small businesses seriously – and nearly a quarter (22%) said they would like to see new legislation and harsher penalties introduced to specifically target late payers.

In addition, the survey found that just 2% of small businesses said they thought the UK’s Small Business Commissioner was helping to tackle the problem of late payment, while 55% of respondents saying they were not aware that the position even existed.

Ed Molyneux, CEO and co-founder of FreeAgent, said: “With the UK economy reeling from the Covid-19 pandemic and many businesses looking nervously ahead at a potential ‘no-deal’ end to the Brexit transition period, it’s easy to overlook the other challenges facing our small business sector.

“However, it’s vital that we do not brush the issue of late payments to one side. Failure to be paid on time remains one of the most widespread and devastating problems for freelancers and small businesses, and very little has been done so far to address the issue.

“Our data shows that around half of the invoices sent by small businesses in the UK get paid late, and there are certain areas where the issue is considerably worse. Some of these late payments go way beyond a week or two, with some invoices taking months to settle or even not being paid at all.

“Small business owners don’t have the luxury of being able to absorb late payments into their accounts – they need to get paid promptly to keep their cash flow healthy. In our current volatile economic climate it is more important than ever for these people to be protected and supported, which is why we urge the government to introduce new legislation and significant penalties to help tackle the scourge of late payment once and for all.”

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Author: Lauren Towner

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