The late payments epidemic still marches on in the United Kingdom, with new stats coming out through headlines at a seemingly steady rate. In the U.K., small businesses (SMBs) are facing a total “bill” of as much as £6.7 billion (nearly $8.43 billion USD), a cost of collections that is up from an estimated £2.6 billion last year, as reported in the Financial Times (FT).
According to Bacs Payment Schemes, which is part of Pay.UK, the collection efforts come as firms look to collect on the £13 billion in late payments outstanding to the 5.7 million SMBs that operate in the U.K.
More than one-third of companies have been waiting more than two months beyond the stated and agreed upon payment terms, and that tally is up from roughly 20 percent last year. These firms are defined as having fewer than 250 people on staff. The total number of firms that are seeing late payments in general now stands at 43 percent, up from 37 percent last year. As has been noted, statistics from the Federation of Small Businesses (FSB) estimated that late payments have caused as many as 50,000 business failures annually, with an economic cost coming in at £2.4 billion.
The FT noted that ministers created a government position last year known as the “small business commissioner,” which has helped recover about £2.1 million in unpaid invoices.
Separately, but also in the U.K., Nucleus Commercial Finance estimated that the closure of many debtors through the Christmas season will hurt roughly one-third of SMBs in the country, as reported by LondonlovesBusiness, noted as a “seasonal financial challenge.” Roughly one-third of businesses are in the midst of trying to satisfy the late payments that are owed.
Chirag Shah, CEO of Nucleus Commercial Finance, said, “We know that the issue of late payments is a challenge faced by too many [SMBs] every day. However, the extended closure of so many businesses over the festive period worsens the problem, and for some businesses, puts them into real financial difficulty whilst they wait for debtors to reopen and settle their bills. Businesses can take action now by speaking to their debtors and encouraging them to settle their bills before they close for Christmas. As a longer-term solution, we look forward to an update from [the] government on the Prompt Payment Code that is underway.”
In terms of individual company news, GlaxoSmithKline (GSK) has admitted to late payments to hundreds of small suppliers — an admission that comes nine years after the company had committed to a “fast payments” code. The late payments have hit suppliers that have now been moved to 30-day terms, after terms had been stretched to 90 days, in at least some cases. However, some suppliers “fear asking for faster payments in case their contracts are terminated,” according to This is MONEY.
GSK said that, since 2012, any supplier that has asked for reduced payment times has been switched over to the aforementioned 30-day terms.
Mike Cherry, national chairman of the FSB, said, “The power still remains in the hands of big business, with some using their dominant position to bully and squeeze suppliers to make their own balance sheets look healthier.”