Late payments hit UK firms

Around 46 per cent of UK firms have reported a sharp slowdown in the speed of debtors’ payments for goods and services, a new survey claims.

Creditsafe’s study on the problem of late payment found that these firms saw payments slow in the last three months of 2008, while 33 per cent said they now have to wait more than 30 days beyond the terms and conditions to get paid.

Some 66 per cent of firms said they were owed debts which had not been paid within the period set out in the terms and conditions of contracts. Creditsafe surveyed 658 businesses between 1 December 2008 and 20 February 2009.

David Knowles, marketing director of Creditsafe, said: "Delaying the payment of invoices has become part of the business culture in the UK. Companies hold onto cash as long as possible to earn interest and contribute to their liquidity position. The knock-on effect of this practice on the businesses they deal with has, up until now, has been mitigated by the widespread availability of credit from the banks."

He added: "Now this access dried up, late payment is becoming an issue which threatens to have disastrous consequences for some UK businesses."

Creditsafe’s survey emerged after figures from the Confederation of British Industry (CBI) last week showed that tightened access to credit was hitting UK businesses hard. The CBI’s second monthly Access to Finance Survey, conducted in February, found that almost 60 per cent of firms that sought new or renewed finance lines said its availability had deteriorated in the past three months. Around 41 per cent had seen no change and no firms saw an improvement, giving a balance of -59 per cent.

Knowles said many companies are holding onto their money for even longer as they try to protect their cash position during the recession.

He added: "Others are facing liquidity issues and business payments are slowing down further at just the wrong time. Disruption to business cashflow is one of the biggest contributors to company insolvencies and when combined with more limited access to credit facilities may put thousands of businesses at risk of going under."

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