I had a coffee last week with a woman who runs a small specialist engineering firm in the Black Country. She has 14 staff, an order book that runs into the autumn, and a fridge full of unpaid invoices from a household-name aerospace contractor.
The total, when she totted it up on the back of a Pret napkin, came to £197,000. None of it overdue by a few days. All of it overdue by between 60 and 110 days, against contracted 30. She had already, that morning, told two suppliers she would have to pay them later than agreed. The cascade has a name: it is called late payment, and it is the slow-motion mugging of British small business.
We have been talking about this for as long as I can remember writing about business in this country. Every government in turn produces a Prompt Payment Code, a Small Business Commissioner, an Annual Report on Payment Practices, and an op-ed by a minister congratulating themselves on having done something. And every year I sit down with another version of the same engineer, with the same fridge, and the same napkin. Nothing changes.
It does not change because the incentives, as ever, do not change. A FTSE buyer has every reason in the world to push its payable days out, and almost no reason at all to bring them in. Their finance director gets a bonus for working capital. Their procurement team gets a sticker for “supplier consolidation”. The small firm at the other end of the contract, meanwhile, gets a dunning email from HMRC about its VAT liability, regardless of whether the cash has actually arrived.
I have been an evangelist for the Prompt Payment Code, since it was discussed when I had the ear, of the then, Prime Minister David Cameron, but let’s be honest: it has the legal force of a strongly worded letter from your tennis club. Suspension is an embarrassment, not a sanction. A FTSE 250 board does not lose sleep over its prompt-payment ranking the way it does about, say, an SEC filing. Until late payment becomes a board-level personal exposure for company directors, the practice will continue, because the practice is profitable.
So make it personal. The single reform I would put in front of the Chancellor, and I will, should I ever meet Rachel Reeves, is statutory interest at the Bank Rate plus four, accruing automatically, with directors of large companies personally liable for any payable overdue by more than 60 days twice in any 12 months. Not the company. The directors. Watch your payable days improve in a week.
I would also, while we are at it, force every company over £100m of turnover to publish a real-time live dashboard of average days to pay, with the contracted rate, the actual rate, and the names of the buyers responsible. Not an annual PDF buried at the bottom of an investor relations page. A living, breathing public number, refreshed nightly, like a football score. There is nothing a procurement director hates more than visibility.
There will be the usual howling from the British Chambers of Commerce-via-CFO lobby, saying that all this will simply push pricing onto small suppliers, raising costs for buyers and consumers. To which the answer is: yes, marginally, and that is correct. Britain has under-priced its small suppliers for two decades by allowing big buyers to use them as an unsecured credit line. Re-pricing late payment is the correction, not the problem.
And the macro effect, if anyone is still listening over the noise of another City lunch, is enormous. Federation of Small Business estimates suggest late payment kills around 50,000 UK firms a year. Fifty thousand. That is more than were killed during the worst of the pandemic. Every single one of those firms had jobs, taxes paid, customers served, premises rented and apprenticeships started. We talk endlessly about a missing tier of mid-market British companies; here, in late payment, is one of the biggest single reasons we don’t have one.
Back in my Black Country engineer’s fridge, the £197,000 will, eventually, arrive. It will arrive on day 117, because a supplier-finance scheme has been waved at her by a polite man from a London bank, charging her three per cent of the face value to settle early on her own invoice. So the contractor pays late, the bank takes a clip, and she takes the haircut. That is, in a sentence, the British small-business economy in 2026.
Late payment is a quiet pandemic. The next Chancellor’s budget could end it in an afternoon. I am no longer holding my breath; but I am, very loudly, holding the napkin.
