Research from Begbies Traynor showed 115,000 firms waited an average of 57 days for payments.
More than 1,000 businesses went bust last year after being forced to wait for late payments, new data shows. New statistics from insolvency specialist Begbies Traynor delved into the number of days firms waited for payments, showing that 115,000 UK firms were forced to wait an average of 57 days, triggering insolvency in more than 1,000 businesses.
The data was gathered from more than a million debtor day reports going back to 2011, and the figures also revealed that of the 1,000 businesses which collapsed last year, 34% had debtor days in excess of 57 days and 15% for longer than 86 days.
Begbies Traynor said the numbers demonstrate how late payments have the potential to be a significant factor of insolvency for North East businesses.
Gillian Sayburn, partner at Begbies Traynor in the North East, said: “In our work across the North East, we regularly encounter the catastrophic effects of late payments, particularly on SMEs.
“The worrying growth of late payments must be addressed if we are to help businesses, and the UK economy, grow. Otherwise, the knock on effects will spiral out of control and this trend of late payment will constrict, squeeze and suffocate growing businesses.
“However, even the largest companies are not immune from the impact of late payments as this practice impairs cash flow and makes businesses less competitive.
“If this form of bad faith trading is allowed to continue then more businesses in the North East will inevitably go to the wall. It is simply not sustainable for suppliers to take the hit when payment is not made on time – even businesses with large financial resources and contingency plans will suffer.
“Our Red Flag Alert data has shown that year-on-year more businesses fall into significant financial distress, and with more than 100,000 businesses filing debtor days last year the suggested trend is that more difficult times are on the horizon. If this is true then UK businesses will need to improve the culture of late payments if our economy is become stronger and more resilient to change.”
The data revealed that the support services sector is most likely to be hit hard by late payments with almost 35,000 businesses reporting debtor days in the last year. Of those businesses, 260 went under during 2018 reporting an average of 25 debtor days.
This was followed by the construction industry with almost 12,000 debtor days filed with an average 61 day wait for payment and 146 insolvencies. The utilities sector has also experienced a worrying increase of 102 per cent from 912 to 1,838 reports of late payment.
MPs on the Business Select Committee last year identified late payments as a major problem holding back SMEs in raising UK productivity.
The committee said there was growing evidence that payment terms are getting longer in many areas and highlighted problems in the construction industry as a particular area of concern.
The Government ’s Small Business Commissioner Paul Uppal said that fixing the late payment culture in the North East could boost the regional economy by up to £100m a year.
The Federation of Small Businesses (FSB) has long fought to eradicate late payments, highlighting how some larger companies exploit the imbalance of power with small suppliers.