The Scale of the UK Late Payments Problem
New research from specialist insurer Hiscox reveals that small businesses across the UK continue to face severe cash flow pressure due to late payments.
Surveying 1,000 small business owners and sole traders via Censuswide, Hiscox estimates that with approximately 5.7 million small businesses operating nationwide, total outstanding late payments could reach £70.4 billion.
Despite the introduction of the Fair Payment Code more than a year ago, delayed payments remain widespread.
The Waiting Time Adds Up
On average:
- Late payments are settled three weeks after the due date.
- Businesses chase 14 overdue invoices per year.
- Across all delayed invoices, SMEs spend the equivalent of 331 days waiting annually.
For 17% of businesses, payments are delayed by more than a month. In some cases, invoices are never paid at all — posing existential risks for firms reliant on a limited client base.
For sole traders, especially those with one or two major clients, even a single unpaid invoice can jeopardize financial stability.
Late Payments by Business Size
The research highlights a clear trend: late payments increase with business size.
- 19% of payments to sole traders are late.
- 25% of payments to firms with 10–49 employees are late.
This suggests that while micro-businesses face vulnerability, growing SMEs also encounter systemic payment challenges.
Sectors Most Affected
Certain industries report higher volumes of late payments:
- IT and Telecoms: 18 late invoices per year (average)
- Finance: 17
- Healthcare: 16
- Retail, Catering and Leisure: 15
- Legal: 14
For IT freelancers and project-based professionals, this can equate to more than one delayed invoice per month — often involving substantial sums.
Has Reform Made a Difference?
The findings come amid ongoing policy efforts to improve payment culture. Alongside the Fair Payment Code, the UK government has announced further tightening of enforcement under the UK Government’s planned 2026 late payment reforms.
However, the Hiscox data suggests structural payment delays persist. Late payments are not merely administrative issues; they directly affect:
- Payroll and hiring decisions
- Investment and growth plans
- Tax compliance deadlines
- Mental wellbeing of business owners
Practical Steps to Reduce Late Payment Risk
Nick Thornhill, Direct and Partnerships Director at Hiscox, outlines five practical measures SMEs can adopt:
- Invoice immediately after completing work.
- Send polite but firm reminders.
- Break larger projects into milestone payments.
- Establish a clear policy for repeat late payers.
- Consider trade credit insurance as part of risk management.
Businesses also report that clear payment terms, strong client relationships, and proactive follow-up calls improve outcomes.
Economic Impact and Outlook
Late payments remain one of the most persistent challenges facing UK SMEs. With billions tied up in unpaid invoices, cash flow fragility continues to limit business resilience, growth, and confidence.
While policy reforms aim to improve payment culture, the burden still largely falls on small businesses to protect themselves through disciplined invoicing, contractual clarity, and financial buffers.
For the UK’s 5.7 million small enterprises, tackling late payments is not just about revenue — it is about long-term sustainability.