Nearly half a million small businesses could go bankrupt this year due to late bill payments, warns the Federation of Small Businesses
- The FSB said the problem of late payments had been made worse by the pandemic
- It also revealed that 78% of small businesses saw their costs increase in the last quarter.
- FSB suggests raising cap on small business rate relief to £25,000
One of Britain’s leading business organizations has warned around 440,000 businesses could go bankrupt this year just because they don’t get bill payments on time.
The problem of late payments had been made worse by the coronavirus pandemic and was “the problem keeping thousands of entrepreneurs up at night”, the Federation of Small Businesses said.
Three in 10 businesses surveyed by the group for its quarterly Small Business Index admitted this problem had increased over the past three months, while just 6% said new payment terms had been agreed during that period. .
Major problem: Three out of ten businesses surveyed by the FSB for its quarterly Small Business Index admitted that the problem of late payments had increased in the past three months
The index further revealed that 78% of small businesses had seen their costs increase – the highest figure in seven years – with expenses, fuel and utilities being the three main drivers of this growth.
At the same time, around three-quarters of UK businesses that sell their goods and services in the European Union saw their international sales fall or stagnate in the quarter and 38% reported a fall in their exports.
The findings come as EU businesses selling goods in the UK now have to contend with new rules requiring them to post full customs declarations and prove that their goods are duty-free under the rules of origin requirements.
A study last year by the FSB found that only a quarter of small businesses affected by these changes were fully prepared before the new regulations, raising concerns about delays at ports and supply chain disruptions. ‘supply.
Other rules and controls, such as export certificates for food products of animal origin, fruits and vegetables, will come into effect later this year.
The FSB said that without taking into account the multiplication of administrative costs for companies operating abroad, as well as rising inflation and payment delays, the viability of many other companies is seriously threatened.
Rising costs: The FSB’s Small Business Index found that 78% of small businesses saw their costs rise in the last quarter – the highest figure in seven years
“The small business community has shrunk in size over the past year and unless action is taken now to address the challenges it faces, history will repeat itself,” said Mike Cherry, national chairman of the FSB.
Cherry added that the new financial year beginning in April would see businesses plagued by increases in the National Living Wage, dividend taxes, corporate rates and National Insurance contributions.
“On top of that,” he noted, “operating costs are rising — many will soon be trying to make energy deals without big business influence or consumer protections.” Small business confidence has fallen in every quarter of 2021.’
Cherry has recommended the UK government raise the cap on small business rate relief to £25,000, increase employment benefit and introduce a more improved version of the Brexit Support Fund for SMEs to benefit the industry.
The government has yet to announce its response to a consultation on new powers for the Small Business Commissioner, an office set up to tackle late and unfavorable payment practices in the private sector.
The power to order payments and impose fines were among some of the issues raised.
Changes were also made last year to the Prompt Payment Code, a voluntary system in which companies pledge to make payments on time and treat vendors fairly. Companies that join the program are required to pay small businesses within 30 days.
A government spokesperson said it was ‘making significant reforms to help small businesses get paid on time, including halving payment time in the prompt payment code and reviewing fines and other new Powers of the Small Business Commissioner”.
“There are plenty of supports available to ensure small businesses are well placed to comply with UK border processes, including one-on-one advice through the Export Helpdesk.”