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Firms fear going to wall

SMEs owed almost £45bn in late payments

Ken Lewandowski: campaign (photo by Terry Murden)

Britain’s SMEs are owed an estimated £44.6 billion in late payments, according to new data.

More than one in five (21%) are owed more than £25,000 and almost one in ten (9%) are owed more than £100,000.

Results from the latest Zurich SME Risk Index show that of those who have experienced late payments, almost two thirds (64%) experience typical delays of more than one month on payments which are already more than 30 days overdue.

Almost half (45%) are subject to payment delays of up to three months on late payments, while more than one in ten (14%) typically wait up to six months. 

Small business owners are seeing the devastating effects of late payments in the market, as almost two thirds (65%) agree that late payments are leading to SMEs being forced to close.

Nearly two in five (39%) confirmed that late payments have had a significant impact on their own firm’s cash flow, while almost a quarter (24%) said that late payments had caused their business to dip into its overdraft in the past. 

Concerns were also raised about the support on offer to mitigate the problems caused by late payments, with half (50%) of small business owners saying the government should be doing more to help SMEs in these circumstances.

Paul Tombs, head of SME proposition at Zurich, said: “£44 billion owed in late payments to British SMEs is an enormous sum. It is no surprise that many have experienced cash flow problems or have been forced to enter their overdrafts as a result. 

“On an individual basis, many small businesses are owed hundreds of thousands of pounds.

“In an environment where cash flow is key to small business survival, the situation is simply unsustainable.

“It is imperative that SME owners receive the support and guidance required and fair access to the funds that they are owed to secure the future of their businesses.”

 Scottish businessman Ken Lewandowski has campaigned for years to tighten up legislation and introduce new systems for dealing with late payers.

He has pointed to a German system where late payers face tax penalties.

He was instrumental in the introduction of project bank accounts for public sector contracts.

It aims to stop the process whereby a main contractor is paid by the government but holds back paying sub-contractors. The money instead goes into the PBA and everyone is paid at the same time.

He wants to see similar action taken to speed up payments in private deals.

 

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