UK firms lose 71 days a year chasing late payments – at a cost of £27bn
UK businesses are spending over 71 days per year – more than a quarter of the working year – chasing late payments, according to the annual European Payment Report from credit management services provider Intrum.
The 26th edition of Intrum’s report surveyed more than 10,000 companies across 29 European countries, shedding light on the challenges that businesses are grappling with in challenging economic conditions.
Its findings show the time spent chasing late payments by UK businesses is costing the economy more than £27bn a year. In addition, the payment gap (the time between agreed terms and actual payment) has risen across all business types.
On average, consumers are taking 10 days to pay invoices, up from seven last year. Businesses are taking 17 days, up from 13 in 2022, and public sector organisations are taking 20 days to pay invoices, three days more than they were last year. Six in 10 UK businesses (61 per cent) expect late payments to increase in the next 12 months.
“Late payments pose a significant challenge to businesses,” says Eddie Nott, Intrum’s Managing Director for the UK and Ireland. “The practice becomes a vicious cycle, as firms hampered by late payments pay their own suppliers later and later, further exacerbating the problem.”
More than half of UK firms (56 per cent) say the payment terms they offer suppliers are harming them as a business. A similar number (54 per cent) said they are paying their suppliers later than they would accept from their own customers. While 55 per cent would like to pay their suppliers quicker, this is not currently feasible for their business.
At the same time, UK firms are facing increasing demands from cash-strapped workers seeking above-average pay increases. Almost all businesses surveyed (91 per cent) said their employees have already asked for a higher-than-normal pay rise or they expect them to ask for one soon.
Nearly two-thirds (63 per cent) of UK businesses say getting paid faster could help them to prioritise their sustainability performance, helping to contribute to a stronger, greener economy, rather than needing to focus on efficiency.
The most common action UK businesses take to chase down debt is legal action (60 per cent) while four in 10 (40 per cent) have clear internal debt recovery processes. Only 12 per cent are working with external collection agencies.
“Late payments have always plagued businesses but what was once an inconvenience has now become a top priority,” adds Nott. “Resources that could be used to invest in growth, digital transformation and hiring are being diverted to ensure firms get paid. This is costing the UK economy £27bn a year in wasted time.”