400,000 small firms have been impacted by poor payment practises in recent months, with high inflation and ‘mounting admin’ causing the business community to further shrink in size if left unaddressed, according to the Small Business Index (SBI).
The new study of more than 1,200 business owners finds that close to one in three (30%) has seen late payment of invoices increase over the last three months, with a further 8% experiencing other forms of poor payment practice. Only 6% say that a change in payment terms has been agreed over that period.
It revealed a bulk of exporters report flat or falling international sales as full import checks take effect, with cost pressures hitting a seven-year high as Federation of Small Businesses (FSB) urges government to tackle surging costs and arrest decline in confidence.
Approximately one in 10 (8%) businesses say late payment is now threatening the viability of their business. Latest government statistics show that there are an estimated 5.5 million small businesses in the UK – a figure which fell by 400,000 over last year’s lockdowns.
The new FSB study suggests that a similar number of firms (440,000) could be forced to close again this year due to late payment alone, with more small firms now expecting their performance to worsen over the coming three months.
Mike Cherry, FSB national chairman, said: “The small business community diminished in size over the past year and, unless action is taken now to tackle the challenges it faces, history is set to repeat itself.
“Late Payment was destroying thousands of small businesses even before the pandemic hit – the pandemic has made matters worse. In the past, the Government has rightly identified greater Board accountability as key to spurring change in this area, but delivery has been slow.”
He added: “Small firms that do business internationally are usually among our most profitable and innovative. That’s why it’s so hard to watch so many becoming increasingly weighed down by bureaucracy.
“The Government should learn lessons from the botched roll-out of the SME Brexit Support Fund and launch a new fund with similar aims but more sensible eligibility criteria, reasonable application deadlines and a genuinely international focus.”