Two fifths of SMEs can’t pay staff on time due to late payment

Late payments are increasingly undermining the stability of UK SMEs, threatening payroll, job security and growth potential. New research from Bibby Financial Services (BFS), based on a study of 1,000 SME owners and decision makers, reveals that late payments from customers prevented more than two-fifths (42 per cent) from paying staff salaries on time in the last 12 months, while nearly a quarter (24 per cent) have paused hiring.

BFS’s recent SME Confidence Tracker also reveals that late payment is harming resilience, with four in ten (41 per cent) small businesses dipping into emergency funds to stay afloat in the last year.

Derek Ryan (pictured), CEO for North West Europe at Bibby Financial Services, comments: “With economic growth already faltering, late payments are a significant threat to the survival of SMEs across the country, applying pressure to businesses already battling high operating costs. When firms are forced to make impossible choices – between hiring and surviving, dipping into emergency funds or struggling to pay staff on time – it’s a clear sign the Government needs to step in.”

The Business and Trade Committee’s most recent Small business strategy report calls on the Government to end the late payment crisis, while BFS’s data demonstrates the issue is worsening. Its survey finds businesses are now owed an average of £66,770 in unpaid invoices – a 10 per cent increase year-on-year. Additionally, over six in ten (62 per cent) say customers are taking longer to pay invoices in full compared to a year ago.

Ahead of the Chancellor’s Spring Statement, SMEs are calling for swift government action to tackle late payment practices. More than two-thirds (69 per cent) believe there should be serious consequences for businesses that repeatedly pay late, while over a quarter (27 per cent) want the Government to implement specific legislation to protect them.

Tim Gelardi, Director of Systems & Compliance at FORT Builders’ Merchant comments: “We are seeing more customers struggling to pay in line with terms, often because they’re facing late payments themselves or failing to secure the margins they expected when bidding for work. Operational and raw material costs are also unpredictable. If prices spike, there’s no guarantee that our customers have factored that into their budgets.

Derek Ryan continues: “Late payments are draining confidence from small businesses and holding back growth. While the Government laid the groundwork for change to the payments framework in last year’s consultation, SMEs are desperate for action, and many are turning to alternative finance for the support they need. If the Government is serious about kickstarting the economy, it must back SMEs with policies that provide certainty that enables businesses to invest in their people, products and services.”

Methodology

This study is based on research of 1,000 UK SME owners and decision makers across the manufacturing, construction, wholesale, transport and services sectors. Research was conducted by independent specialists, Critical Research, between 7th – 15th January 2025.

About Bibby Financial Services

Bibby Financial Services (BFS) is a leading independent financial services partner to over 8,500 SMEs worldwide.

BFS provides specialist working capital, asset finance and foreign exchange solutions helping businesses to grow and thrive in domestic and international markets.

Formed in 1982, BFS is part of the Bibby Line Group (BLG), a diverse and forward-looking family business delivering personal, responsive and flexible customer solutions for over 215 years.