Viability threatened

Late payment culture ‘much worse in Scotland’

Debt, money etc
Firms say late payments impact on their viability

Late payments continue to plague small businesses despite moves by government to ease the problem, according to two surveys published today.

A poll by Barclays reveals that nearly three-quarters (72%) of SMEs across Scotland are currently waiting on late payments from customers – significantly higher than the UK average of 58%.

The problem rises to more 94% for medium sized enterprises with 50 to 249 staff.

Eighty per cent of those at the receiving end of late payment say they would refuse a job with a potential customer if they were known for paying late.

The scandal has influenced consumer behaviour with more than half of consumers surveyed (58%) saying they would boycott a business – big or small – if they knew they regularly paid their suppliers late.

A second survey by the Federation of Small Businesses found that a third of Scottish business owners have experienced an increase in late payments over the last three months of 2021.

FSB is warning that this trend could lead to more firms closing their doors for good, as it releases the latest findings from its quarterly Scottish Small Business Confidence Index (SBI). Around one in ten Scottish firms (12%) say late payment is now threatening the viability of their business.

Andrew McRae, FSB’s policy chairman for Scotland, said “Scottish firms are being squeezed by rising overheads, ongoing public health restrictions, and servicing mounting debts. To top it off, firms have to contend with the UK’s chronic late payment culture that’s deteriorated over the course of the pandemic.

“Thousands of Scottish businesses needlessly go under every year because of late payment. That’s why every UK big business should have a non-executive director on its board with direct responsibility for payment culture. That’s also why FSB backs moves to beef up the powers of the Small Business Commissioner to take on the worst offenders.”

FSB’s research is based on a survey conducted between 2 and 13 December.

Small Business Commissioner, Liz Barclay, said: “Repeated delays and excuses, and extended payment terms of 90/120 and even 360 days are common.

“Uncertainty kills small and micro businesses as well as freelancers and sole traders. As well as customers and would-be employees we need to see potential investors refusing to invest in firms that don’t treat small suppliers well. We also need this to be top of the Board governance agendas. A change in payment culture is decades overdue”.

Through the Prompt Payment Code (PPC), businesses are able to claim late payment interest and compensation to businesses signed up to the code if they miss a payment deadline.

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