8% of small businesses face going out of business in 2022 because of late payment
Nearly one in ten small businesses – or approximately 440,000 firms – could shut this year because of late payment from clients, according to research.
Of small businesses surveyed by the Federation of Small Businesses, 8% said late payments were now threatening the viability of their businesses.
The FSB study of more than 1,200 business owners found that close to one in three (30%) had seen late payment of invoices lengthen over the last three months.
A further 8% experienced other forms of poor payment practice.
Latest government statistics show that there are an estimated 5.5 million small business in the UK – a figure which fell by 400,000 over last year’s lockdowns.
Small business confidence has dropped again as more small firms now expect their performance to worsen over the coming three months than expect an improvement. Retail is the most pessimistic small buisness sector followed by accomodation and food.
The vast majority of small businesses (78%) say costs are rising. Fuel (46%) and utilities (45%) were singled out as specific reasons of rising costs.
Elsewhere, as the UK imposes import controls on goods coming in from the EU – regulations which are only going to become more onerous over 2022 – three quarters (74%) of small firms that do export reported that overseas sales were flat or falling in the last quarter. Close to one in four (38%) of these firms reported a decrease in exports. Previous FSB research shows that only a quarter of small importers are fully prepared for new import checks.
FSB chairman Mike Cherry said: “The small business community diminished in size over the past year and, unless action is taken now to tackle the challenges it faces, history is set to repeat itself.
“After another frustrating festive season, small firms are facing flashpoint after flashpoint. Today, it’s a fresh wave of admin for importers and exporters – in three months’ time it will be a hike to the jobs tax that is national insurance contributions, a rise in dividend taxation, business rates bills and an increase in the national living wage. On top of that, operating costs are surging – many will soon be trying to strike energy deals without the clout of big corporates or the protections afforded to consumers.
“Late payment was destroying thousands of small businesses even before the pandemic hit – the pandemic has made matters worse.”