Let us recall that inter-company credit is a major factor in the economy. Across Europe, businesses are facing insolvency due to declines in revenue and delayed payment. One UK report argues a fifth of SMEs in the UK will collapse due to a lack of cash because of Covid-19. Separate research by the Federation of Small Business says 50,000 businesses a year go under because of delayed payments.
Delays in B2B payment have been an ongoing issue across sectors. Due to Covid 19, the problem has been exasperated. Research from Bacs, and commissioned by Pay.UK in 2019 found that the UK SME late payment debt has risen to a staggering £23.4 billion, up £10.4 billion on the £13 billion owed in 2018. On top of that, the research showed that UK SMEs are now facing a total bill of £4.4 billion a year, just to collect money they are owed. The average late payment debt burden has also increased to £25,000 per company, up from just over £17,000 in 2018. The statistics were largely based on B2B payments.
The UK Government’s Department for Business (BEIS) introduced new measures to tackle late payment in June 2019, including new powers for the Small Business Commissioner, and a dedicated fund to help SMEs purchase technology to help with payments. The Government’s Cabinet Office has also written to public sector bodies recently, telling them to pay suppliers despite the Coronavirus pandemic.