More than 400,000 small businesses could go under because customers are failing to pay their bills on time, a survey has warned.
The Federation of Small Businesses said that late payments, inflationary pressures and Brexit-related red tape could reduce the number of companies operating in the UK.
In a poll of 1,271 small enterprises, it found that 30 per cent of companies had experienced a rise in delayed payment of invoices over the past three months. Eight per cent of small business owners said that late payment was threatening the success of their firms.
With the UK having about 5.5 million small businesses, that means 440,000 could be forced to close this year because of late payment alone, according to the FSB. The figure exceeds the 400,000 companies that were forced to shut over the past year because of Covid lockdowns, it said.
“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,” Mike Cherry, the federation’s national chairman, warned.
The FSB said that confidence had fallen last year, with the mood among business owners blighted by “another uncertain festive season”. Seventy-eight per cent of small companies reported a rise in overheads, with payments for bills such as fuel and utilities at their highest levels since 2014.
With full import checks and rules of origin requirements now in place for companies that do business in the European Union, 74 per cent of small exporting companies said that international sales had been flat or falling over the past three months. Thirty-eight per cent of these firms reported a decrease in exports.
“Today, it’s a fresh wave of admin for importers and exporters,” Cherry said. “In three months’ time it will be a hike to the jobs tax that is national insurance contributions, a rise in dividend taxation, business rates bills and an increase in the national living wage. On top of that, operating costs are surging.”
Cherry said that if the government was “serious about levelling up”, it would have to help businesses struggling to pay their bills. “Increasing the small businesses rates relief ceiling to £25,000 would take 200,000 more firms out of this regressive tax altogether, primarily in levelling up target areas,” he said.
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Late payers threaten thousands of small firms