Recent research has revealed that the number of late payments in the UK has hit a two-year high.
Trying to get paid has never been easy and you can learn about chasing invoices on this website by the way.
The level of late payments experienced by British businesses in the final quarter (Q4) of 2015 was up 12 percent on figures for Q3 2015. According to the 2015 research 17 percent of companies reported difficulty in making payments on time, up from 10 percent in 2014.
The Euler Hermes Quarterly Overdue Payments Report analyses 17 major industry sectors for reported debtor incidents. It receives updates daily from 250,000 UK businesses covered by its trade insurance. These ‘debtor incidents’ include everything from late and delayed payments, to defaults, insolvency and county court judgements.
Troubling news in the construction sector
The research found that increased debtor incidents were reported in 14 out of 17 of the major industry sectors analysed. The construction industry was the worst hit, with more payment delays than any other UK sector, accounting for 31 percent of all recorded payment incidents. This represented a year-on-year rise of 27 percent, and 12 percent when compared to Q3 of 2015.
There is some good news coming out of the construction sector with the growth of output in December signalling a positive end to the year. However, some companies are still struggling in the face of low-margin contracts that were agreed in the fallout of the economic crisis. There are also rising capital pressures and an increasing skills gap that are continuing to put businesses and their payment terms under pressure.
The headline findings
• UK businesses see late payments rise 12 percent in Q4 2015 when compared to Q3 2015;
• One-in-six firms has suffered as a result of customers failing to pay for goods or services on time;
• Overdue payments increased across 82 percent of the major industry sectors last year;
• Late payments in the construction sector surged by 26 percent year-on-year.
There is some cause for cheer
Despite the disappointing results across most of the sectors analysed, the UK automotive and electronics industries did offer some cheer. The level of late payments in these sectors fell by 12 and 15 percent respectively.
However, this good news did not spread to late payments in the metals and chemicals sectors. Companies operating in these industries have come under increasing threat by falling European demand and the Chinese slowdown, as evidenced by the recent trouble at Tata Steel. This has led to a year-on-year increase in payment issues of 28 percent and 13 percent respectively.
Insolvencies are set to rise
Despite the fall some industries have seen in the number of late payments, insolvencies of UK businesses have been forecast to rise by five percent this year. The start of 2016 has seen increased volatility, so it’s essential businesses remain vigilant.
Slowing GDP growth and long-lasting low inflation are impacting on the turnover of UK firms. Rising wages resulting from recent increases in the minimum wage and the strengthening pound are also starting to eat into some companies’ competitiveness. This is expected to be a significant contributing factor to the increase in insolvencies.
The final nail in the coffin for some UK businesses is expected to be a rise in interest rates and the increase in new market entrants across the sectors. To compound these challenges, the ‘Brexit’ question is dampening confidence domestically.
How can we help?
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