Small and medium-sized enterprises across the UK are waiting an average of 72 days to be paid, according to new data from the Federation of Small Businesses, as the late payment crisis shows no sign of easing despite years of government pledges to tackle the issue.
The figures, compiled from a survey of 1,200 small business owners, reveal that nearly half of all invoices issued by SMEs are settled beyond the agreed payment terms. The construction and professional services sectors were identified as the worst offenders, with average payment delays exceeding 80 days in some cases.
“Late payment is not a minor inconvenience, it is a cash flow emergency for thousands of businesses every month,” said Tina McKenzie, policy chair at the FSB. “When a small firm waits nearly three months for payment, it limits their ability to pay staff, invest in growth, or even keep the lights on.”
The financial toll is significant. The FSB estimates that late payments contribute to the closure of roughly 50,000 small businesses each year. Larger corporations are frequently cited as the slowest payers, with extended payment terms of 90 or even 120 days becoming common practice in some supply chains.
Government efforts to address the problem have included the Prompt Payment Code, a voluntary scheme that asks signatories to pay within 30 days for small suppliers. However, compliance remains patchy. A recent review by the Small Business Commissioner found that a quarter of signatories were not meeting the 30-day target, while enforcement powers remain limited.
The delayed rollout of the government’s Procurement Bill, which would require public sector contractors to demonstrate prompt payment practices throughout their supply chains, has drawn criticism from business groups. Several trade bodies have called for mandatory 30-day payment terms to be written into law for all business-to-business transactions.
Some technology solutions are gaining traction as a practical response. Invoice financing platforms and digital payment systems that automate credit control have seen rising adoption among SMEs seeking to shorten their cash conversion cycles. Providers report a 40 per cent increase in new business enquiries over the past twelve months as firms look for alternatives to chasing late payers.
The FSB is urging the government to strengthen the powers of the Small Business Commissioner, including the ability to impose fines on repeat late payers. The organisation argues that without meaningful deterrents, large companies have little incentive to change their payment practices.