Overdue invoices have reached a three-year high and the problem could get worse as companies face higher costs from April.

Analysis by insolvency group R3 of data provided by Creditsafe found 611,754 unpaid invoices on the books of Scottish firms last month. This was the highest number since January 2022.

The number was up 44.3% year-on-year from 423,836. This was the second largest yearly percentage increase in the UK behind only the West Midlands.

Richard Bathgate, chair of R3 in Scotland, said: “The last few years have been incredibly challenging for Scottish businesses. While a decline in inflation levels in 2024 provided some relief by slowing the pace of rising costs, it has only slowed them, and this has also been overshadowed by a host of other mounting challenges.

“High and rising energy bills are continuing to squeeze profit margins, and the additional burdens introduced in the Autumn Budget, including the increase in Employers’ National Insurance Contributions and the minimum wage, have added further strain.”

Mr Bathgate added: “These challenges are even harder to overcome for Scotland’s many small businesses, which often lack the financial cushion needed to cope with such shocks. As a result, we’re seeing more businesses delay payments for longer.

“While late payments are a concern across the UK, the figures in Scotland are rising at an unprecedented level.

“Our economy is particularly reliant on sectors like oil and gas, agriculture, and construction, all of which are facing significant challenges.

“Regulatory issues, rising costs and ongoing supply chain issues have hit these sectors especially hard in recent years, which has put more pressure on cash flow and is likely to have affected their ability to meet payment deadlines.

“If conditions don’t improve early this year, we could see even greater pressures on businesses, with some being forced to turn to insolvency processes to address their financial struggles.”