FSB calls for government action amid late payments crisis
The Federation of Small Businesses (FSB) has urged for government action as 440,000 companies face closure this year due to late payments and rising costs.
The business group surveyed 1,271 small businesses for its fourth quarter Small Business Index and warned that a worsening of the UK’s late payment crisis, high inflation and mounting admin for firms that trade internationally will cause the business community to further shrink in size if left unaddressed.
The FSB’s study found that nearly a third (30 per cent) of its members have seen late payments of invoices rise over the last three months, with a further eight per cent experiencing other forms of poor payment practice. Only six per cent said that a change in payment terms has been agreed over that period.
As a result, eight per cent said late payment is now threatening the viability of their business with 440,000 companies facing closure this year due to late payments alone.
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More small firms now expect their performance to worsen over the coming three months than expect an improvement, with pessimism especially pronounced in the retail, accommodation and food industries.
The vast majority of small businesses (78 per cent) said costs are rising, with the figure at a seven-year high.
Input was the most common cause given with 49 per cent citing it as a main driver of higher outgoings, followed by fuel (46 per cent) and utilities (45 per cent). All figures are at their highest levels since the fourth quarter of 2014.
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Elsewhere, with full import checks and rules of origin requirements now in place for firms which trade in the EU following Brexit, the majority (74 per cent) of small exporting firms said that international sales were flat or falling over the past quarter.
Over a third (38 per cent) of these firms reported a drop in exports.
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“The small business community diminished in size over the past year and, unless action is taken now to tackle the challenges it faces, history is set to repeat itself,” said Mike Cherry, national chairman at the FSB.
“After another frustrating festive season, small firms are facing flashpoint after flashpoint. Today, it’s a fresh wave of admin for importers and exporters – in three months’ time it will be a hike to the jobs tax that is national insurance contributions, a rise in dividend taxation, business rates bills and an increase in the national living wage.
“On top of that, operating costs are surging – many will soon be trying to strike energy deals without the clout of big corporates or the protections afforded to consumers.
“Late payment was destroying thousands of small businesses even before the pandemic hit – the pandemic has made matters worse.
“The pandemic is absorbing bandwidth, and rightly so, but policymakers need to understand that late payment is the issue that keeps thousands of entrepreneurs up at night, and one that has worsened in lockstep with lockdowns. We need to see words turned to action.”