The United Kingdom’s business landscape is facing an unprecedented crisis of late payments, with a significant majority of companies reporting overdue invoices and a growing number fearing for their financial stability. A comprehensive 2025 survey by Coface reveals that a staggering 90% of UK businesses experienced late payments over the past year, a trend that has become a defining challenge for the nation’s economy. This pervasive issue is not only disrupting cash flow but also exacerbating fears of insolvency, particularly among the United Kingdom’s crucial small and medium-sized enterprises (SMEs).
A Systemic Payment Crisis Unfolds
The latest business news highlights a deeply entrenched problem: 44% of UK companies report that these payment delays are occurring with greater frequency than before. The average payment delay now stands at 32 days, a figure that consistently strains the financial health of businesses across various sectors. This situation contrasts sharply with international norms, as UK businesses report significantly higher rates of late payments compared to their counterparts in France, Germany, and Poland, and even wider global averages. The core reasons behind these delays have shifted from mere operational hiccups to reflecting buyers’ financial difficulties and, in some cases, deliberate postponements intended to act as free financing.
SMEs Disproportionately Exposed to Cash Flow Risks
Micro and small firms are bearing the brunt of this late payment epidemic. With limited cash reserves and often shorter payment terms, these businesses are far more vulnerable to financial shocks caused by delayed income. Nearly half of these smaller enterprises have reported an increase in payment delays, compared to a lower proportion of mid-sized and large companies. This precarious situation means that for many SMEs, late payments are not just an inconvenience but a direct threat to their ability to cover payroll, invest in growth, or even remain operational. The impact extends beyond finances, causing significant stress, affecting mental wellbeing, and potentially leading to business closures, with an estimated 38 businesses closing daily due to this issue.
Sectoral Variations and Uneven Optimism
While the problem is widespread, certain sectors are experiencing particularly acute challenges. The construction industry reports the highest incidence of late payments, with 95% of firms facing delays and an average wait time of 38.2 days. The automotive, transport, and business services sectors also face significant payment delays, averaging over 38 days. In stark contrast, publishing, communications, and media firms experience the shortest delays, around 21 days, although even half of these businesses report substantial cash flow impacts. Looking ahead to 2026, only 37% of companies anticipate a decrease in late payments, and optimism is not uniform. Smaller businesses remain notably more skeptical about potential improvements compared to their larger counterparts, highlighting a persistent divide in confidence regarding the United Kingdom’s economic future.
Government’s Robust Response to Tackle Late Payments
In response to the escalating crisis, the UK government has unveiled its most significant legislative reforms in 25 years, aiming to establish the toughest late payment laws in the G7. These measures include mandatory maximum payment terms of 60 days, which will be reduced to 45 days over time, alongside a 30-day invoice verification period to expedite dispute resolution. For the first time, audit committees within large firms will be legally required to scrutinize payment practices, increasing accountability at the board level. Furthermore, the Small Business Commissioner will gain expanded enforcement powers, including the authority to conduct spot checks and impose substantial fines on persistent offenders, with penalties potentially reaching millions of pounds.
Alongside these regulatory shifts, the government has launched a £4 billion finance package designed to support SMEs, offering start-up loans and expanded mentoring programs. These reforms, along with initiatives like the 2024 Payment Practices Regulations and the Fair Payment Code, signal a concerted effort to foster a more responsible payment culture. However, despite these robust measures, the prevailing sentiment among many small businesses suggests a cautious outlook, emphasizing that sustained enforcement and broad-based recovery are essential to truly alleviate the pressure. The ongoing trend of late payments underscores the critical need for continuous vigilance and adherence to new regulations to ensure the financial resilience of the United Kingdom’s business community.
