Late payments increase as Scottish business optimism plunges

A third of Scottish business owners say that late payment increased in the last three months of 2021, according to new research from the Federation of Small Businesses (FSB).

FSB is warning that this trend could lead to more firms closing their doors for good, as it releases the latest findings from its quarterly Scottish Small Business Confidence Index (SBI). Around one in ten Scottish firms (12%) say late payment is now threatening the viability of their business.

In the final quarter of 2021, FSB’s confidence index for Scotland dropped to -22.0 points from +1.2 points in the previous three months. That means that more Scottish small firms now expect their performance to worsen over the coming three months than expect an improvement.

By comparison, the UK index fell to -8.5 points at the end of last year, meaning that a typical Scottish business is less confident about the future than the UK average. The UK figure fell in every quarter over 2021, having stood at +27.3 points in Q1.

Across the UK, FSB found business confidence to be lowest in the retail and accommodation and food industries. Further, the vast majority of Scottish small businesses (82.5%) say costs are rising, with fuel, utilities and other input costs all cited by firms.

Andrew McRae, FSB’s policy chair for Scotland, said “Scottish firms are being squeezed by rising overheads, ongoing public health restrictions, and servicing mounting debts. To top it off, firms have to contend with the UK’s chronic late payment culture that’s deteriorated over the course of the pandemic.

“Thousands of Scottish businesses needlessly go under every year because of late payment. That’s why every UK big business should have a non-executive director on its board with direct responsibility for payment culture. That’s also why FSB backs moves to beef up the powers of the Small Business Commissioner to take on the worst offenders.”

FSB’s research is based on a survey conducted between 2 and 13 December. On 10 December the First Minister urged workers to cancel Christmas parties, and outlined plans to renew covid restrictions. Tomorrow the Scottish Government will give another covid rule update.

The latest government statistics show that there are an estimated 338,000 small businesses in Scotland – a figure which fell by nearly 20,000 in the first year of the pandemic alone.

Andrew McRae said: “The number of local and independent businesses operating in Scotland has fallen substantially since the pandemic began. Our research shows that the firms remaining are deeply worried about the future.

“The prospect of new public health restrictions at the end of last year not only snuffed out the optimism of many Scottish independent retail, hospitality and tourism businesses but also hurt their supply chains.

“As the Scottish Government looks to the future, Ministers must focus on local economies as well as public services. The economic impact of the virus and the associated restrictions has taken a disproportionate toll on our small business community. Getting local and independent firms firing on all cylinders this year must be a key priority.”