Forgive us if we’re starting to sound like a broken record, but we feel like we’ve heard this one before.
The UK is in recession again after a worse-than-expected first quarter that saw the economy contract by 0.3%, and now a new study by BACS has found that the average amount owed to small businesses has once again grown, now up to a staggering £35.3 billion, more than half the £64 billion Deloitte estimates is outstanding to all UK businesses. On average £45,000 is owed to each small business in the UK – up from £39,000 last year.
The average duration of overdue payments has also grown again from 25.6 days in 2011 to a massive 29 days over the agreed payment terms so far in 2012. It would seem once again as cash gets tight, large corporates are leaning on the UK’s smallest firms, including freelancers and contractors, for a free line of credit. The trend appears to be accelerating too – late payment periods grew by 3.4 days between 2011 and 2012, an increase from the 3.1 days growth the previous year.
The problem has been acknowledged by Ministers, and although they have heavily criticised the late payment legisation put in place by the previous Labour Government, have yet to take any action to address the situation.
Several groups have been formed to help small businesses recover payments on time, including the Government-sponsored Prompt Payment Code who encourage companies to pledge their commitment to meeting invoice terms, and a similar private sector effort called Pay On Time.
Photo by Neil T