Six in 10 UK SMBs struggling as late payments hit crisis levels

By Gloria Methri

A new report from GoCardless, in partnership with the Federation of Small Businesses (FSB), has revealed an escalating late payments crisis threatening UK small businesses.

A survey of over 2,000 small business owners found that 45% are experiencing more late payments than a year ago, while 50% fear the situation will worsen in the next 12 months. For many, the delays are severe—almost a quarter (24%) of SMBs report receiving payments up to 60 days late.

With small businesses accounting for 60% of UK employment and 48% of business turnover, the financial strain of delayed payments is exacerbating an already challenging economic landscape.

The Domino Effect of Late Payments

The report underscores the ripple effect of late payments on the broader economy. 36% of small businesses struggle to pay their suppliers on time, and 18% have faced difficulties paying employees due to delayed incoming funds.

Over 28% of SMBs have resorted to short-term financing, such as loans and credit lines, to cope with cash flow issues caused by late payments. This figure rises to 40% in the food and beverage sector and 32% in retail, highlighting industry-specific challenges.

Beyond financial hardship, delayed payments are damaging business confidence and growth. A staggering 61% of small businesses say that late payments are preventing them from reaching their full potential, rising to 67% in the food and beverage industry and 64% in manufacturing.

A Dangerous Trend

Disturbingly, many small businesses have resigned themselves to the issue, with 50% accepting late payments as an ‘inevitable cost of doing business. Nearly a third (32%) feel they have little to no control over managing late payments.

The study also highlights a disparity in power dynamics, as 50% of businesses say they have little or no control over late payments from big corporations, compared to 30% from small business customers and 26% from individual consumers.

While the government has vowed to crack down on late payments, businesses are already exploring self-help solutions.

• 53% of small businesses are considering implementing fees to discourage delayed payments.
• 33% are looking to change payment methods, seeking more reliable transaction processes.
• 27% aim to automate payments, reducing reliance on manual invoicing and follow-ups.

Caroline Lavelle, Chief Commercial Officer at FSB, said, “Our latest Small Business Index shows confidence hit its lowest point since 2020. Late payments add to the mounting pressure from economic uncertainty, high taxes, and labour costs. This research from GoCardless exposes the sheer scale of the problem and its impact on business growth.”

Jolawn Victor, Chief Growth Officer at GoCardless, added, “The findings suggest a sense of resignation among small businesses when it comes to late payments. But with nearly a quarter waiting up to 60 days for money they’re owed, it’s time for change. Automating collections with pull-based payment methods like Direct Debit can help businesses get paid up to 47% faster, reducing the burden of chasing payments.”

As the UK grapples with a crisis caused by late payments, small businesses must explore innovative financial tools to mitigate risks while policymakers work on long-term solutions.