UK firms are expecting an increase in late payments over the next 12 months, according to the European Payment Report 2021.
The report, which surveyed 11,000 businesses across 29 European countries, found 62% of UK firms were more concerned than ever about their customers’ ability to pay, with a further 46% stating the payment gap as a real risk to the sustainable growth of their business.
The report stated: “Although companies hope to unlock new growth in 2021, their ambitions are undermined by the impact of late payments. In the UK, 72 percent say they could increase investment in sustainability and in pursuing digital innovation if they were paid more quickly.”
A year of turmoil caused by the Covid-19 pandemic has motivated more than half of UK business owners to improve their management of late payments, with many cutting payment times and enforcing stricter terms.
The report suggested that there has been a reduction in the payment gap – the gap between agreed terms and the actual time taken to pay – with the shortest period now with consumers at eight days, down from 10 days.
For business-to-business customers, the payment gap has fallen from 19 days to 12 days, while the public sector has seen its payment gap more than halve from 23 days to 11 days.
However, 61% of large businesses admitted that they rarely consider the potential negative impact late payments could have on smaller companies.
Moreover, just a third of businesses have a code of ethics in place focused on prompt payment, a significant drop from the 48% that confirmed such a code existed within their firm only a year ago.