UK businesses owed £41bn in late payments

Almost half of UK businesses had invoices paid late in the past six months

Almost half of UK businesses have fallen victim to late payments in the past six months, equating to £41.5bn in delayed invoice settlements.

The research from insolvency trade body R3 also found that 15 per cent of these companies' invoices were settled later than agreed, and that the issue is a primary or major factor in one in five corporate insolvencies.

Andrew Tate, vice president of R3, said: "Late payment puts unnecessary strain on a business's cashflow, increasing the risk of insolvency. Despite government guidelines and business campaigns, late payments still remain all too common.

"When a business enters insolvency, customers can see this as an opportunity to further delay payments or avoid payment altogether. Doubts over cashflow caused by late payment can make it impossible to continue to trade a business in administration until a buyer is found."

Not only are tardy payments detrimental to the company in question, they are also affecting the economy, R3 said.

John Allan, national chairman of the Federation of Small Businesses (FSB), said: "The weight of evidence showing the damage poor payment practices are having on the UK economy grows greater each day, with the amount owed in late payments now at £41.5bn.

"Once again we find it is sole traders and smaller firms that are facing the brunt of late payments, and this is putting viable businesses at risk of closure."

Smaller businesses suffer the most at the hands of late payers as the impact is magnified compared with their larger counterparts, of which just one per cent said around half of invoices had been paid late compared with seven per cent of sole traders.

Tate added: "A year ago, the FSB found half of its members had been paid late in the previous year. Although the government is keen to make an impact on late payment, progress has been disappointingly slow over 2014 and 2015, with the number of businesses affected by late payment stubbornly high."