More than three in five small businesses have reported “late or frozen” payments throughout the Covid-19 pandemic, a major study has revealed.
The research, published by the Federation of Small Businesses (FSB), suggests that poor cash flow is likely to worsen the impending economic recession unless decisive action is taken.
Entitled “Late Again: how the coronavirus pandemic is impacting payment terms for small firms”, the survey of 4,000 small firms found that 62 per cent have been subject to late payments over the coronavirus outbreak.
This is despite just one in 10 formally agreeing to suspend payments with clients, meaning the vast majority have been left unfairly out of pocket.
The research also shows that there is “no discernible difference in late payment activity between public and private sector supply chains”, with 65 per cent of businesses who supply other businesses and 63 per cent of businesses who supply the public sector reporting late payments.
Businesses in the wholesale, legal and accounting, and advertising and marketing industries, meanwhile, have been the most affected, with 71 per cent, 62 per cent and 62 per cent reporting late payments respectively.
Commenting on the figures, FSB National Chairman Mike Cherry has called on policymakers to give the Small Business Commissioner “additional powers to investigate and fine repeat late payment offenders” and “make 30 days the standard definition of prompt payment as set out in the Prompt Payment Code”.
“Before the COVID-19 outbreak struck, many small firms were already under immense financial pressure because of late payments,” he said.
“With cash flow drying up as the lockdown took hold, this situation has worsened. Sadly, some unscrupulous corporations are trying to inoculate themselves from the impacts of COVID-19 by withholding payments, or even freezing them, at the expense of small businesses.”
The report comes as new figures revealed that the sum of late payments across the UK rose 80 per cent to £23.4 billion in 2019.
If you need legal support in addressing issues with late payments, please get in touch with our expert team today.
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