Let’s be clear and point out that this posting from This is Money is highlighting an issue being faced by small businesses in the U.K., as suggested by the FSB (Federation of Small Businesses), a leading British business organization. The point is that in the neighborhood of 440,000 small businesses face closure due to unpaid invoices. We recall that late payment and invoice defaults were an issue in the U.K. pre-pandemic, although we don’t recall the specific depth of the issues, so it is not surprising that the issue has seemingly worsened, given intermittent lockdowns, cash flow issues, and supply chain disruptions. Now a rise in energy costs is also contributing to the bad news.
‘The problem of late payments had been worsened by the coronavirus pandemic and was ‘the issue that keeps thousands of entrepreneurs up at night,’ the Federation of Small Businesses said… Three in ten firms surveyed by the group for its quarterly small business index admitted this problem had grown over the last three months, while only 6 per cent said new payment terms had been agreed during this period… The index additionally found that 78 per cent of small companies had seen their costs increase – the highest figure in seven years – with outgoings, fuel and utilities being the three main drivers of this growth.’
There also seems to be some new rules and regulations that have affected those UK small businesses doing business across the EU, as additional requirements around rules of origin have been implemented, for which apparently a good percentage of businesses were not prepared, with more administrative burdens to be added this year as well. So, the FSB is calling for help, although it is unclear that things like a ‘prompt payment code’ will help under such circumstances.
‘The small business community diminished in size over the past year and, unless action is taken now to tackle the challenges it faces, history is set to repeat itself,’ urged Mike Cherry, the FSB’s national chairman… Cherry added that the new financial year beginning in April would see businesses beset with rises in the national living wage, dividend taxes, business rates and national insurance contributions… ‘On top of that,’ he remarked, ‘operating costs are surging – many will soon be trying to strike energy deals without the clout of big corporates or the protections afforded to consumers. Small business confidence dropped in every quarter of 2021.’
‘Cherry recommended the UK Government boost the small businesses rates relief ceiling to £25,000, raising the Employment Allowance and introducing a more enhanced version of the SME Brexit Support Fund to help benefit the sector… The Government has yet to make an announcement on its response to a consultation on new powers for the Small Business Commissioner, an office set up to tackle late and unfavourable payment practices in the private sector.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
