Insight & Analysis

Press release: Late payments growing concern for UK businesses

Published: Jul 2019

11th July 2019 – A third (33 per cent) of UK businesses who were paid late in the last year did not chase outstanding payments, according to new research from Lloyds Bank Commercial Banking.

Fear of damaging valuable customer relationships was the biggest rationale by some margin, cited by two thirds (62 per cent) of businesses. This was followed by capacity and time constraints (27 per cent).

The Lloyds Bank Business Barometer research, which gathered the views of more than 1,200 UK companies, revealed that more than half (52 per cent) have been paid late in the last year, and almost four in 10 (38 per cent) have suffered overdue invoice payments on multiple occasions.

The UK’s small businesses* are owed an average of £79,500 in outstanding invoices with a tenth (nine per cent) owed more than £200,000.

When looking at the business community as a whole, seven per cent are owed more than £200,000 in unpaid invoices. For businesses with a turnover of more than £25m the average amount of outstanding invoices is £160,000.

Businesses in London are owed an average of £98,000 in outstanding invoices, the highest of any UK region, followed by the West Midlands (£66,000) and the South West (£64,000).

Ben Stephenson, Managing Director for Invoice Finance and Asset-Based Lending, Global Transaction Banking at Lloyds Bank Commercial Banking, said: “Late – as opposed to just slow – payments are doubly difficult for businesses to manage.

“Not only does having cash tied up in outstanding invoices damage productivity and put pressure on cash flow, limiting firms’ ability to fund growth; it also robs firms of the certainty they need to plan ahead.”

Tools exist for businesses to deal with late payments more effectively

Among businesses that were paid late in the last year and took proactive steps to recover payment, the most popular approach to chasing was email and phone reminders (74 per cent and 64 per cent respectively).

A quarter (24 per cent) took legal action while more than a fifth (22 per cent) applied interest or charges on an overdue invoice.

Only five per cent of firms that chased late payments in the last year complained to a government agency while almost half (49 per cent) reported that they were unaware of government measures to support them in tackling late payments.

Ben Stephenson added: “With a lack of awareness about the options available to mitigate the impact of late payments leaving some businesses under more pressure than they need to be, it’s absolutely imperative that firms are better clued up on options. These include government support and invoice financing.

“Indeed, funding options like invoice financing can enable businesses to access the money they are owed, typically within 24 hours, accelerating growth and productivity improvements.

“Financial flexibility has arguably never been more important given the backdrop of ongoing uncertainty. It’s for this reason that Lloyds Bank has committed to lend up to £18 billion to UK businesses in 2019, which includes the provision of bespoke solutions that help businesses boost cash flow.”

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