Late payments choke SME growth

Despite orders improving, more cash is tied up in late payment chain, FPB survey has claimed

Time lag: late payments are stifling SME growth

Cashflow difficulties are suffocating any improvements in orders and turnover among small firms due to an increase in late payments, Forum of Private Business (FPB) figures have revealed.

According to a monthly survey of members on the FPB’s Economy Watch panel, 43 per cent of respondents had seen an increase in orders, with 18 per cent reporting a decrease and 39 per cent no change.

In total, 35 per cent said their turnover has increased from February, 24 per cent said it had fallen and 40 per cent said it had stayed the same. Total turnover for respondents is up by a reported £508,000 in March compared to the previous month.

But the total amount of capital tied up in late payment at any one time is £16.6m, an increase of £1m from February, which equates to 35.5 per cent of FPB members’ combined turnover.

Matt Goodman, policy representative at the FPB, said: “While there are indications of recovery for small firms, this is being more than offset by increasing late payment.

“Unfortunately, it is a case of two steps forward and three steps back as far as
small businesses and the economy are concerned. Late payment devastates cash flow," he said. "It is important that more large companies sign up to the Government’s prompt payment code and that the principle of sustainable payment is embraced across the supply chain.”

The FPB survey also revealed that business confidence has decreased, with 39 per cent of respondents saying they are ‘confident’ or ‘very confident’, compared with 44 per cent in February.

But more positively, levels of pessimism have fallen – with 13 per cent of respondents saying they felt ‘pessimistic’ or ‘very pessimistic’ compared with 16 per cent in February.