More than one in five (21%) regional businesses are owed payment on invoices that are more than 30 days past their due date.
New research by insolvency trade body R3 into the fortunes of businesses in the North East, Yorkshire and Humberside found that, despite substantial efforts being made by government and industry to modernise payment practices, a substantial proportion of regional businesses are still struggling to get paid in a timely fashion for the work they’ve done.
Across the UK, manufacturing (27%) was the sector with the highest rate of businesses that were owed late payments, followed by service industries (22%), retail and distribution (both 13%).
Previous R3 research found that, in 2013-14, almost half of the insolvency practitioners that work on corporate insolvencies said they had worked on at least one case where late payment was a major factor.
And according to an earlier R3 survey of the insolvency profession, which works with struggling businesses across the country, late payment is a primary or major factor in around 20 per cent of corporate insolvencies.
Neil Harrold, vice chair of R3 in the North East and a partner at Hay & Kilner Solicitors, says: “The UK’s late payment problem is a persistent one, and puts unnecessary strain on the finances of businesses.
“If payment terms are agreed with suppliers, then customers have no legitimate reason not stick to them, let alone still not having paid what they owe thirty days after the initial deadline.
“Businesses having to wait too long to receive money owed can have a harmful knock-on effect not only on their own operations, but also further down their supply chain.”
The late payment research is part of R3’s latest Business Distress Index, a long-running survey of business concerns and growth prospects carried out by BDRC Continental.
Neil Harrold continues: “Late payment is one of the more frustrating causes of business failure – it is avoidable, and often has a disproportionate impact on smaller businesses.
“Although insolvency processes and insolvency practitioners can often help businesses recover from financial difficulties, it would be better if otherwise viable firms’ futures were not put at risk in the first place.
“Delayed payments can create pressures on cash flow for growing businesses where there’s no need for them to arise, and can stymie or even stop altogether the development of companies that might otherwise be creating and sustaining regional wealth and employment.”
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