£10.5bn payments drag forces UK firms to curb global growth – new research from Airwallex and CEBR
More than half (55%) of UK businesses have scaled back their international growth plans this year, held back by the friction embedded in outdated, disconnected cross-border payment systems. That’s more than 250,000 UK firms that trade internationally, with capital and ambition that is being stalled by infrastructure most businesses have no visibility into, let alone control over.
The hidden costs of moving money across borders are slowing business growth. According to the Centre for Economic and Business Research (Cebr)’s latest report, the ‘Global Growth Tariff,’ this lack of transparency comes from inefficiencies in cross-border B2B payments infrastructure. The report was commissioned by Airwallex, a leading AI-native global financial platform for modern businesses.
The friction adds up to an estimated £10.5bn in working capital locked out of the UK economy every year, equivalent to around 0.35% of UK GDP and represents capital that could otherwise be funding the growth businesses are currently scaling back.
UK firms face extra cost burdens
British businesses report an average annual cost of £411,000 from cross-border payment inefficiencies, which includes staff time, additional fees, FX costs, delays and missed global trade opportunities. This is notably more than what this costs businesses in Germany (£230,000) and the Netherlands (£211,000), and three times more than what French firms face (£138,000) each year.
The findings highlight where payments are a drag on the UK’s global competitiveness, with more than half of UK firms (53%) saying cross-border payment friction is putting them at a competitive disadvantage.
As part of this additional cost burden, UK cross-border payments cost 19% more than domestic payments, compared with a 15% EU average, largely because businesses outside the eurozone need to convert currencies more often.
Liam Daly, senior economist at Cebr, said of the findings: “These figures point to a structural disadvantage for UK exporters. British firms trade in sterling while paying to convert into the euro at every turn – a cost the UK’s biggest trading partners don’t face. Broader regulatory and market differences between UK and EU payments systems compound this further, and it isn’t something businesses can simply negotiate away. At 0.35% of UK GDP, payment friction is now a problem for policymakers as much as it is for finance directors.”
UK businesses paying to fix broken cross-border payments
Almost half (48%) of all payments a small business makes fails straight-through processing, which is the automatic process a payment always goes through between being sent to when it’s settled. This compares to fewer than three in every 10 payments for large firms (29%), who benefit from the size and scale behind their operations, which are less prone to issues.
Meanwhile, UK firms are wasting more time than European businesses on fixing issues due to the volume of payments that fail to make it to their recipients, spending on average eight hours a week – the equivalent of 53 working days each year.
“The data suggests UK firms may lose more time to failed payments than their European counterparts because, unlike Eurozone businesses, they lack seamless direct access to SEPA, the standardised euro payments system. Without an EU entity or banking licence, UK firms often route payments through intermediaries or handle additional currency conversion, increasing the risk of mismatches and the need for manual compliance checks, which adds to both how often payments fail and how long they take to fix.” adds Liam Daly, senior economist at Cebr.
Businesses changing how they manage cross-border payments
Two thirds (67%) are planning to change their payments operation as a result of the challenges they face, with more than a quarter (26%) actively planning to shift payment volumes away from traditional banks and providers.
If cross-border payment frictions were eliminated and firms could claw back the money they’re currently wasting, UK finance leaders say they would re-invest the money into developing new products and tech (44%), improving their marketing and sales function (33%) and exploring new international markets (31%). Beyond enhancing the business and prioritising growth, nearly a quarter (24%) also said they would hire more staff.
Christos Chamberlain, general manager for the UK & Europe at Airwallex, added: “UK businesses are treating payment friction as the cost of doing business internationally – it isn’t. It’s a choice, and increasingly the wrong one. The businesses getting this right are treating payments infrastructure as a growth lever, not a back-office function, and it shows in how fast they’re able to move into new markets. £10.5bn a year isn’t a rounding error; it’s the gap between the UK exporters who scale and the ones who stall. The winners over the next decade won’t be the businesses cutting costs they can see. They’ll be the ones who are fixing those they can’t.”