Before COVID-19, poor payment practice was already embedded as one of the most serious impediments to small business growth and survival. At FSB we’d heard countless stories of smaller businesses across the North East that reported that they’d been paid late and the huge impact it was having on them.
Over the summer FSB undertook some research to see what impact the COVID-19 crisis was having on late payments to small businesses. What we’ve found is that the late payments crisis worsening across the region.
In summary what our members told us was:
– 62% of all small businesses have experienced either an increase in late payments from customers (44%) and/or had their payments frozen completely (30%) as a result of COVID-19.
– 10% of all small businesses have experienced an increase in payment terms from customers as a result of COVID-19.
– Of those small businesses supplying other businesses, 65% have experienced either an increase in late payments from customers (53%) and/or had their payments frozen completely (29%) as a result of COVID-19.
– Of those small businesses supplying to the public sector, 63% have experienced either an increase in late payments from customers (55%) and/or had their payments frozen completely (23%) as a result of COVID-19.
This is completely unacceptable and needs to be tackled as a matter of urgency. When you pair our findings with BACS research that shows there’s nearly £24bn owed to small businesses due to late payment it shows the massive changes we need to make.
Unless we can successfully tackle the scourge of late payments and, more generally, poor payment practice, many small businesses will be forced to close their doors for good and will be unable to play their part in spearheading the North East’s economic recovery.
Longer term, this poor practice harms the UK’s large corporates whose future success depends on productive, robust and sustainable supply chains. Without small and micro businesses around who’s going to supply them?
It’s about time that big business and government started to change the payment culture across the North East. Small businesses have had enough of being treated as another line of credit to bigger firms and the Government needs to clamp down harder on those that pay late.
Government must recognise that small firms will be at their most vulnerable during the early stages of recovery when cashflow will be at its tightest. Being paid on time could be make or break for many North East small businesses.
Small businesses will be at the heart of the recovery of the North East economy. We all need to back them to give them a fighting chance of doing it.
Simon Hanson – Federation of Small Businesses