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Peer2Peer Finance News | August 23, 2019

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£266bn of late payments hamper UK SMEs’ growth

£266bn of late payments hamper UK SMEs’ growth
Anna Brunetti

LATE payments from suppliers totalling £266bn are straining UK small- and medium-sized enterprises (SMEs)’ ability to grow and create up to 3.4 million new jobs, new research suggests.

15 per cent of the SME sector’s average annual turnover is stuck in the payment chain, according to a survey of over 1,000 firms commissioned by supply chain finance provider Crossflow Payments and conducted by YouGov.

More than half of SMEs affected by delays said that they had to wait for 10 or more days after the deadline to receive payment.

The heavy burden is standing in the way of job creation, with 63 per cent of respondents who would use the missing working capital to expand their team saying they would hire up to five new staff members.

Over one in five businesses would increase marketing and sales budgets, while a similar number said they would boost the salaries of their existing staff.

Read more: Funding Circle: UK SMEs set to back Tory leadership

The study also highlighted that one in 10 businesses have suffered further credit pains after the EU referendum, experiencing a deterioration of payment terms since the landmark vote.

And 31 per cent of firms are worried about the potential impact of Brexit negotiations on their business over the next 12 months, while one in five stress about currency fluctuations.

Read more: SMEs strained by late council payments

“Brexit is increasing the issue of late payments and reducing investment by SMEs at a time when the UK faces economic uncertainty,” said Crossflow Payments’s chief executive Tony Duggan.

“Delays in receiving payment promptly from customers is acting as handbrake on SMEs, preventing them from making key investment decisions for the future and ultimately stunting growth. In 2017, it should no longer be the case that businesses face such hurdles.

“Squaring the circle of working capital needs of corporates, and their suppliers, will be an increasingly important lever as business works through Brexit.”

Read more: UK SME manufacturers hit six-year export order high