The crisis of late payments is worsening for small businesses at the same time as their costs are increasing, according to the Federation of Small Businesses (FSB).
The organisation has said the issue of invoices being left unpaid is growing in significance and could potentially threaten the future of more than 400,000 businesses across the UK this year.
Over 1,200 small business owners were polled recently by the FSB and roughly one in three said they have been impacted by late payments over the past three months.
Around one in 10 of the business owners asked said that their issues with late payments are serious enough to potentially threaten the viability of their operations.
Official data suggests that the UK’s overall business population decreased by around 400,000 in 2021, and the FSB is concerned that a similar number of enterprises will also be forced to close in 2022.
From the FSB’s perspective, big companies leaving the invoices of their smaller counterparts unpaid for long periods is a major cause of cashflow crises, with rising prices already squeezing the margins of small companies across the country in early 2022.
The lobbying group is calling for the government to step up its efforts to insist that big companies pay their smaller suppliers on time.
“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,” said Mike Cherry, the FSB’s national chairman.
“Small business confidence dropped in every quarter of 2021. As we head into the New Year, the government needs to act now if we’re to reverse that trend and secure an economic bounce back,” he added.
According to Mr Cherry, the issue of late payments was already a major problem for small firms prior to the pandemic but the virus crisis is understood to have made the situation considerably worse.
“The pandemic is absorbing bandwidth, and rightly so, but policymakers need to understand that late payment is the issue that keeps thousands of entrepreneurs up at night, and one that has worsened in lockstep with lockdowns,” he said in a recent statement.