Further call for action
Small firms use new finance to bridge late payments
Mike Cherry: ‘government must make this crisis a top priority’
Small firms are applying for new finance to manage cash flow rather than to invest in their businesses, according to new research which further exposes the late payments crisis.
Fewer than one in four used money raised in the last quarter to update equipment, while even smaller numbers used funds for expansion of their business (16%) or recruitment (2%).
The late payment crisis leads to the closure of 50,000 small businesses a year at a cost of £2.5 billion to the economy. The latest figures from Pay.UK show that the balance of outstanding late payments almost doubled to £23.4 billion in 2019.
Mike Cherry, national chairman of the Federation of Small Businesses, said: “If this Government wants to leave a lasting legacy amongst small businesses, it has to make ending the UK’s late payment crisis a top priority.
“It’s troubling that so many external finance applications are driven by cashflow concerns. This really shouldn’t be the case – you wouldn’t dream of doing your weekly shop and telling the cashier that you’ll pay for it in 100 days, but corporations take this approach to small businesses in droves.
“The uncertainties facing big businesses over the past few years will have no doubt increased the temptation to use small firms as free credit lines. We need to put that attitude to bed, for good.