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Late payment stopping UK businesses hiring more employees PDF Print E-mail
Tuesday, 30 May 2017
Late payment is preventing UK businesses from hiring more employees, according to the annual European Payment Report by Intrum Justitia.

The global credit management firm surveyed 10,468 companies in 29 European countries on their opinions about what drives business and the impact of late payment. In the UK, 453 companies participated.

The report reveals a significant increase in late payment, with 55 percent of UK companies being asked to accept longer payments they feel comfortable with, up from 37 percent last year. Crucially, 42 percent of respondents said faster payments would enable them to hire more staff.

UK companies say large/multi-national firms are the worst late payment culprits – of those who were asked for longer terms than they are comfortable with, 60 percent were asked by large/multinational companies (up from 52 percent the previous year) and 41 percent were squeezed by SMEs. The public sector has a better record (nine percent). Both SMEs and the public sector have improved since the 2016 report, when figures of 53 percent and 21 percent were reported respectively.

Around two-thirds (64 percent) of UK firms say inefficient administration is the cause of customers paying late.

The problem results in a vicious circle, where businesses receiving late payments are forced to pressurize their subcontractors to also accept late payment. Half of UK businesses admit to paying bills late, with 5 percent saying they pay late on at least half of their bills.

This impacts growth, according to 48 percent of UK businesses, while 42 percent said late payment threatens the survival of the company.

“It is alarming that the payment culture is going in the wrong direction,” said CEO & President of Intrum Justitia Mikael Ericson. “The economic environment is severely damaged when contractual terms for sub-suppliers are pushed towards 90 days or longer and firms deliberately pay later than agreed. We need initiatives to establish a radically new culture of prompt payment.”

The European Late Payment Directive was introduced in 2011 and has been a success in the UK, the report found. Of UK respondents, 36 percent said they were familiar with the directive and 42 percent of those said it has led to faster payments, compared with the European average of 17 percent. The UK has also had its own legislation on late payment since 1998.

“We need to do much more to change perspectives on business payment. Prompt payment should be on the sustainability agenda. That is the only way we can consistently change behaviour. It would help our small and medium sized businesses significantly – leading to more jobs being created,” added Ericson.

Most UK companies (67 percent) are not worried about the impact of the UK’s impending departure from the EU.

When asked ‘How would a weaker European Union affect your business?” 42 percent of UK companies answered ‘not at all’, while 25 percent were positive. Only 11 percent were ‘negative’, about the prospect. This contrasts with Europe as whole, where only 8 percent were positive about a weaker EU and 31 percent were negative.

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