R3 report: More than 1.5m UK businesses carry overdue invoices as late payments increase
Late payment pressures intensified for UK businesses in the first quarter of 2026, with a growing number of companies carrying overdue invoices on their books, according to a new report from R3, the UK’s trade body for restructuring, turnaround and insolvency professionals.
R3’s latest Quarterly Business Health report, based on data from Creditsafe, shows that the number of overdue invoices rose to 17.48 million, up 3% on the same period last year, while 1.57 million UK businesses had overdue bills on their books.
While insolvency‑related activity – including administration and voluntary and compulsory liquidations – fell by 6% to 7,212 cases compared to Q1 2025, they rose by 9% compared to the final quarter of 2025, highlighting that financial pressures on UK businesses are intensifying at a time of economic uncertainty and rising costs.
Tom Russell, president of R3, the trade body for restructuring, turnaround and insolvency professionals, said late payments remain a key risk factor for business failure. He commented: “Our latest Business Health report highlights an early warning sign for UK businesses, with late payment pressures continuing to build. More than 1.5 million companies are carrying overdue invoices, showing that day‑to‑day cashflow remains under real strain.
“Late payments are a significant contributor to business failure, and mounting arrears can quickly turn manageable cashflow issues into a wider crisis. With businesses also facing higher energy and fuel costs linked to global uncertainty, our members expect pressure to intensify as the year progresses.”
The government states that late payments cost the UK economy £11bn each year and lead to the closure of 38 UK businesses every day, while announcing plans to tackle the issue. Construction firms, already the most distressed sector, are among those hardest hit by payment delays according to a report by the Business and Trade Committee.
Further findings from R3’s report include:
- Late payments varied by region with the West Midlands recording the highest number of overdue invoices (3.05 million), followed by Greater London (2.91 million) and Scotland (2 million).
- In percentage terms, the sharpest rises in overdue invoices were recorded in the West Midlands (up 17% on Q1 2025), Scotland (up 9%) and the North East (up 5%).
- Construction remained the most distressed sector in Q1, with 1,159 insolvency‑related cases, followed by wholesale and retail (975 cases) and accommodation and food services (923 cases).
Tom Russell, who is also a licensed insolvency practitioner and director at James Cowper Kreston, concluded: “It is evident that many businesses are operating with limited financial resilience, with small and medium sized businesses particularly exposed to the impact of late payments.
“With this in mind, business owners should prioritise credit control and seek professional advice early if they begin to struggle, rather than waiting until problems become unmanageable.”
In a video released by the Department for Business and Trade, one small business owner commented on the impact of late payments saying: ‘Late payments are the biggest problem in my world. They seep into my personal life – everything. They are constantly on my mind. It’s so devaluating. It’s so stressful.’
Read R3’s Quarterly Business Health report