Half of SMEs suffer late payments – business news 2 September 2021
James Salmon, Operations Director.
Half of SMEs suffer late payments. Worst payers on the FTSE identified. Bank holiday sees consumer activity surge. Manufacturing growth slows and lots more business news.
Half of SMEs suffer late payments
A detailed analysis of how the UK’s small businesses were impacted by COVID-19 and other economic challenges in 2020 has been published in a joint study by leading payments authority, Pay.UK, and Europe’s largest credit management membership body, the Chartered Institute of Credit Management (CICM).
The research, which set out to track how many organisations suffered from late payment and the impact this has on their future sustainability, found that more than half of all of the country’s smaller businesses suffered from late payment, owed a collective £17.5 billion in late payments.
A huge 51 percent of UK small and medium size enterprises (SMEs) were affected by delays in receiving payments for their goods and services; that’s shown barely no improvement since 2019 where 54 percent of SMEs experiencing late payments and well above the figures reported in 2017 and 2018 despite many such as shops and online businesses working only on up front payments.
And, while the overall amount owed to the country’s SMEs fell from £23bn in 2019 to £17.5bn in 2020, the total remains massively higher than the £12.9bn late payments debt reported in 2018 and 2017’s £14.2bn.
What is more, 59% of SMEs reported they would be threatened if their late payment reached £50,000 or higher.
Three quarters of those experiencing late payments received payment one month or more over agreed terms, and 27% are still waiting longer than two months to get paid.
The damage caused is shown by a third of small businesses experiencing late payments having to rely on bank finance, and why one in five resort to reducing directors’ salaries in order to manage cashflow.
The worst late payers are private sector businesses,who accounted for 59% and £10.9bn of overdue invoices. But what is most interesting, especially given the noise made by various small business organisations that would suggest the problem is restricted to large businesses alone, is that more than three quarters of the outstanding private sector debt (£8.3bn) is owed by one SME to another! Big business owe £2.6bn, while late payments from consumers add up to £4.4bn (24%) with the public sector at £3.1bn (17%).
Sue Chapple, Chief Executive of the CICM, says that late payment cannot be put solely at the foot of big business: “Certainly the feedback we are receiving from members, many of whom hold senior roles in major PLCs, is that they are taking significant steps to protect their supply chain, and some are even insisting on paying supplier invoices within 14 days or less, regardless of longer terms and conditions.
“Small businesses can take action to reduce late payment volumes by invoicing correctly and on time and adhering to any specific requirements their customers may have (e.g a Purchase Order number) to ensure they do not fall foul of a simple process or risk their invoice being in dispute. They can also look at simple techniques such as offering small discounts for early settlement.
“Whereas there are, of course, many businesses who are wanting to pay late – partly because they, in turn, are trying to manage their own cash position – there are many more who value their supplier relationships. Agreeing terms and conditions from the outset, and employing professional credit management best practice, can make all the difference in getting paid and keeping the cash flowing.”
Worst payers on the FTSE identified.
Travel company Tui, drinks conglomorate Diageo and engine maker Rolls-Royce are among the slowest FTSE 350 listed groups to pay their suppliers, according to new research.
A report by Good Business Pays campaign has named and shamed the top 10 slowest payers in the FTSE 100 and FTSE 250 indices, using the latest information submitted under the Duty to Report regulations to the Government.
It found that defence industry giant Meggitt, is the worst late payer, taking an average 132 days to pay and failing to pay 85% of invoices within agreed contract terms.
Bulmers and Magners maker C&C group is next up with 120 days and travel operator TUI follows with 101 days.
Diageo is in fifth place, taking an average 84 day, with Premier Foods and Rolls Royce both taking 76 days, and pharmaceutical giant GlaxoSmithKline in tenth place with 75 days.
The worst offenders therefore take more than four months to settle bills.
Around 50,000 businesses go bust each year due to cash flow problems caused by late payments, according to the Federation of Small Businesses (FSB). It is the biggest single cause of business failure.
Until the late payment culture in the UK is tackled, many more good businesses will fail. CPA is using late payment legislation to help its clients make former customers pay compensation for all the late payments they suffered going back years. Call us on 020 8846 0000 and ask for Peter Uwins and see how we can get you compensated for the pain of late payment and also discourage the late payment culture.
Call for freeport clarity
The ICAEW has called for greater detail on Rishi Sunak’s flagship freeports policy. The Chancellor hopes that the eight English freeports announced in the March Budget will act as hubs for global trade and investment in the UK. They will offer a suspension on the payment of normal customs duties and are designed to help level up the economy outside of London. Frank Haskew, head of tax at the ICAEW, commented: “From a customs perspective, there isn’t yet a good awareness of what you can or cannot do and there’s a severe lack of people with the necessary customs knowledge, so there’s an issue of skills and capabilities to implement freeports successfully.” “There is still a lot of uncertainty about how freeports will actually work”, he added, saying the ICAEW has “pressed HMRC about when we can expect to see the regulations laid and any guidance issued”. Meanwhile, ICAEW business tax manager Richard Jones has warned: “Businesses looking to set up in freeports need to plan in advance.”
Bank holiday sees consumer activity surge
Barclaycard data suggests that the August bank holiday was the busiest for consumer activity since Christmas 2019, with transactions 14.4% up on the same long weekend in 2020 and 9.4% higher than in 2019. The analysis shows Saturday and Sunday saw more transactions than on any day since Christmas Eve 2019, with activity especially strong in the leisure and entertainment and food and drink sectors. In the leisure and entertainment sector, transaction volumes were up 37.2% on 2020 and 26.8% higher than in 2019, while in the food and drink sector activity jumped 20.3% on 2020’s August bank holiday and by 14.5% on 2019’s. Reflecting on the surge in consumer activity, Rob Cameron, chief executive of Barclaycard Payments, said: “This is hopefully a sign of more positive times to come, and a testament to the strength and resilience of British businesses when it comes to adapting and thriving in a post-lockdown world”.
Manufacturing growth slows
The IHS Markit/CIPS Manufacturing Purchasing Managers’ Index (PMI) dipped to 60.3 in August, with the UK’s factory output growing at the weakest rate for six months. The slowdown in the rate of growth, from a high of more than 65 in May, has been attributed in part to supply chain issues that have been hitting several sectors. Survey respondents said supplier delays had been caused by a shortage of materials, shipping delays, port bottlenecks, Brexit and a shortage of logistics industry staff – with these factors all contributing to rising costs. Despite a dip in growth, confidence among executives is at a three-month high with almost two-thirds of companies saying they expect output to rise over the coming year. It was also shown that employment in manufacturing is up for the eighth consecutive month. Martin Beck, senior economic adviser to the EY Item Club, said the data suggests the reason for weaker growth “lay with supply rather than demand”, with strong growth for new orders but shortages of materials and staff meaning manufacturers “struggled to satisfy orders.”
Shop prices rise 0.4%
Data from the British Retail Consortium (BRC) and NielsenIQ show that UK shop prices rose 0.4% month-on-month in August, with this driven by a 0.6% rise in non-food prices. The figures also reveal a 0.8% year-on-year decline, with this representing a slowdown in deflation from the 1.2% year-on-year fall recorded in July. Reflecting on the figures, BRC chief executive Helen Dickinson said retailers are seeing “mounting pressures” from rising commodity and shipping costs, lorry driver shortages and Brexit-related red tape, saying they are “fighting to keep their prices down as far as possible” but warning “this will not be sustainable for much longer”. Ms Dickinson said that without Government action, it will be consumers who “pay the price.” She has urged ministers to increase the number of HGV driving tests taking place, change the rules on funding for driver training and provide temporary visas for EU drivers.
FTSE 100
The FTSE 100 is making moves as Just Eat Takeaway.com drops out alongside mining engineering firm Weir. Aerospace company Meggitt and Wm Morrison Supermarkets will take their places.
Home improvements
UK Homeowners are now borrowing more money from mortgage lenders than ever before to fund home improvements, according to new figures. According to mortgage broker Mojo Mortgages, the average amount of money being applied for by existing homeowners to fund renovation projects has increased by just over £13,000 (up 25 per cent) over the course of the pandemic – rising from an average of £52,209 in 2019 to £65,267 as of August 2021
OPEC+
At their latest meeting OPEC+ stuck with a plan to boost crude production, with the cartel calculating that the global market can absorb the additional supply as demand improves and stockpiles get drawn down.
Barratt Developments
Barratt Developments saw pre-tax profit for the 12 months to 30 June advance 65.1% to £812.2 million as it rebounded strongly from the pandemic. The increase came as completions increased 36.8% to 17.243, revenue was up 40.7% to 4,811.7 and the operating margin was up 250 basis points at 16.9%.
Amazon
Amazon is looking to hire 55,000 staff globally for corporate jobs and roles in robotics, research and engineering. About 40,000 jobs will be in the US, with 2,500 in the UK and the remainder mostly in India, Germany and Japan. CEO Andy Jassy said Amazon needed more staff to keep pace with expansion of its retail, cloud computing and advertising arms.
Apple
Apple said that companies that do not offer in-app purchases, including Netflix and Spotify, would from 2022 be allowed to link to their own payments systems from its app store. Currently all users must pay for apps via Apple’s own system, with the tech giant taking a healthy cut.
Supply issues
JD Wetherspoon has said that some of its pubs have run out of some beer brands because of supply chain issues. A Coca-Cola bottling giant also said it was suffering from similar problems due to a lack of drivers and a shortage of aluminum cans. The UK is facing a shortage of lorry drivers that hauliers have blamed on C-19 and Brexit. The UK government has consistently said that UK drivers need to be found.
House prices climb to £248k in August
House prices rose 11% year-on-year in August, according to data from Nationwide, with this an increase on the 10.5% growth recorded in July. Month-by-month, prices were up 2.1%, marking a rebound after July saw a decline of 0.6%. The increase in prices seen in August has lifted the value of the average UK home to £248,857, £4,628 higher than July’s £244,229. While a shortage of properties on the market has boosted values and the historically low interest rate environment has driven demand, Nationwide’s chief economist Robert Gardner noted the positive impact of the stamp duty holiday. While the tax break tapered at the end of June, Mr Gardner says buyers are still looking to take advantage of the relief that is in place until the end of September. Looking ahead, he said: “underlying demand is likely to soften around the turn of the year if unemployment rises, as most analysts expect, when Government support schemes wind down.” Martin Beck, senior economic adviser to the EY Item Club, said there are “plenty of props supporting the housing market”, pointing to the stamp duty holiday, ultra-low mortgage rates and the substantial savings accumulated by some households during lockdowns. On the outlook for the sector, he suggested that “the odds of a significant downturn in house prices anytime soon looks small.”
Scotland urged to expand four-day week trial
Scotland has been urged to expand trials of a four-day week, with the country’s government having pledged a £10m fund for companies trialling a four-day week following changes in working practices caused by the coronavirus pandemic. The call for a broader trial comes as a new report reveals that 80% of people think they would prefer a shortened working week if their pay was protected, with the same proportion saying it would improve their wellbeing and 65% suggesting it would be a positive move for productivity. The report comes from IPPR Scotland, with the think-tank calling for trials to see how a four-day week works in non-office employment, for staff on lower pay, and among those who are already part-time, have flexible arrangements or are on limited-term contracts. It also suggests that there is a need not only to cap maximum hours but to put a minimum-hours limit on employment.
Why should you become a CPA member!
The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid since 1914. We have seen many financial crises, this one will be particularly deadly for suppliers for some time to come.
CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. And we provide credit information so you can monitor and assess your key customers.
Unlike other credit management companies, we charge our members a fixed annual subscription irrespective of how high the debt value is!
It takes less than 17 minutes to see how you would benefit, do you have the time now?
No face-to-face meeting required – just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
When you see your money come in, you will be so glad you used CPA.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
Maybe you no longer work with them. Under legislation, you are entitled to compensation you for those late payments you have suffered.
You put up with the PAIN – now claim the GAIN!
Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
CPA (LPC) Recoveries is using our bespoke software and decades of experience to do just that for our clients
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.