HomeInsights400,000 small firms threatened by late payment

400,000 small firms threatened by late payment

The Federation of Small Businesses (FSB) is warning 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.

Its latest quarterly survey of more than 1,200 business owners found that close to one in three (30%) has seen late payment of invoices increase over the past three months, with a further 8% experiencing other forms of poor payment practice. Only 6% say that a change in payment terms has been agreed over that period.

440,000 firms may be forced to close

As a result, 8% say late payment is now threatening the viability of their business. The FSB study suggests that 440,000 smaller firms could be forced to close again this year due to late payment alone. Meanwhile, the vast majority of small businesses (78%) say costs are rising. The figure is at a seven-year high.

Businesses trading in the EU struggling

Elsewhere, with full import checks and rules of origin requirements having come into effect on 1st January for firms that trade in the EU, the bulk (74%) of small exporting firms report that international sales were flat or falling over the past quarter. Close to one in four (38%) of these firms report a decrease in exports. 

Government urged to take action

FSB National Chairman Mike Cherry said: “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.

“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.”

He added: “If this government is serious about levelling-up, it needs to get serious about helping community businesses struggling to make ends meet as costs surge. Increasing the small businesses rates relief ceiling to £25,000 would take 200,000 more firms out of this regressive tax altogether, primarily in levelling-up target areas, meaning more investment, recruitment and retention within local economies up and down the country.”

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