Late payments costing UK economy £11bn as SMEs struggle to invest

Late payments are costing the UK economy an estimated £11bn a year and leaving small businesses (SMEs) waiting almost a month to be paid, amid growing concerns over blocked cashflow across the economy.

Research from Sage shared with City PM found that 49 per cent of SME invoices are paid late, with businesses waiting an average of 27 days after issuing an invoice before receiving payment.

The findings land as government pushes its Late Payments Bill through Parliament and ramps up efforts to improve payment practices across British business.

The data suggests many firms are being denied the cash needed to invest and adopt new technologies at a time when ministers are placing growing emphasis on productivity and digital transformation as drivers of economic growth.

Despite the pressure on cashflow, Britain’s small business sector continues to show signs of resilience.

Sage’s latest UK SME Pulse data found profits across UK SMEs grew 7.4 per cent in the year to the first quarter of 2026, the strongest rate of growth since 2022.

Real revenues also increased by 3.2 per cent, marking a fourth consecutive quarter of growth.

The figures point to a sector continuing to expand despite a challenging economic backdrop, though business groups argue stronger payment practices could unlock significantly more investment and growth.

The issue is particularly significant as policymakers seek to accelerate technology adoption among smaller businesses.

Separate research published this week found only 21 per cent of UK small businesses use artificial intelligence regularly, while just six per cent have embedded AI into everyday operations.

Cost remains the biggest barrier, cited by 53 per cent of firms, followed by skills shortages and concerns around data privacy.

Stronger cash positions could allow more firms to invest in productivity-enhancing technologies, digital tools and AI systems, and the government is also betting on e-invoicing as part of the solution.

Set to be introduced from 2029, e-invoicing enables invoice data to move directly between buyers’ and suppliers’ financial systems.

According to Sage, businesses using e-invoicing are typically paid between five and seven days faster than those relying on traditional invoicing processes