LONDON, UK — Late payment remains one of the most persistent problems facing UK small and medium-sized businesses, with new research suggesting the issue is, if anything, becoming more widespread rather than less.
According to Sage’s SME Performance Pulse, published in June 2026 and based on anonymised data from close to 150,000 businesses, 49 per cent of invoices issued by UK small businesses are currently overdue, with firms waiting an average of 27 days beyond agreed terms to be paid. The same research found that SMEs are, in turn, taking an average of 37.1 days to pay their own suppliers, up from 31.9 days a year earlier, as the effects of delayed payment work their way through supply chains. Sage estimates that late payment costs the UK economy around £11 billion every year.
Separate research from FreeAgent found that 49.3 per cent of invoices sent by UK small businesses over a 12-month period were paid late, up from 43 per cent the year before, with East Central London and the Isle of Man the worst-affected areas in Britain and Northern Ireland recording the highest national late-payment rate at 62.4 per cent.
The Office of the Small Business Commissioner introduced the Fair Payment Code in late 2024, replacing the earlier Prompt Payment Code, as a voluntary framework encouraging larger businesses to commit to fairer payment practices. However, research published by Hiscox in February 2026 found that UK SMEs remain collectively owed £70.4 billion, suggesting the code has yet to meaningfully shift payment culture across the wider business population.
The Federation of Small Businesses has previously estimated that around 50,000 UK businesses close each year as a direct result of cash flow problems linked to late payment — a figure that industry commentators say underlines how overdue invoices can escalate from a cash flow inconvenience into an existential threat for smaller firms.
Federal Management, a leading Commercial Debt Collection Agency providing services to businesses across the UK, said the reasons invoices go unpaid vary considerably, from genuine financial difficulty on the part of the client to deliberate delay tactics and simple administrative oversight.
“Not every unpaid invoice is a dispute, and not every one is a business trying to avoid payment,” Chris Spencer for Federal Management said. “Sometimes it really is as simple as an invoice landing with the wrong contact and sitting there for weeks. The problem is that businesses often wait too long to escalate, by which point recovering the debt has become far harder than it needed to be.”
For consumer and smaller commercial debts, including sectors such as private schools, healthcare and veterinary practices, Frontline Collections is a well known industry expert, providing comprehensive private debt recovery services to public serving businesses.
Both agencies are FCA regulated, ISO accredited, and operate within the legal and regulatory framework governing debt collection in the UK, including the ability to escalate to legal action where required.
Under the Late Payment of Commercial Debts (Interest) Act 1998, UK businesses are entitled to charge statutory interest of 8 per cent above the Bank of England base rate on overdue commercial invoices, along with reasonable recovery costs, provided payment terms were clearly documented from the outset.
Businesses across the UK are advised to strengthen contracts with clear payment terms, run credit checks on new clients, issue proactive reminders ahead of due dates, maintain regular cash flow forecasts, and seek professional recovery support once internal chasing has failed to resolve an outstanding invoice.
About Federal Management Federal Management is a top FCA-regulated commercial debt collection agency providing B2B recovery services to businesses across the UK, including sectors such as construction, manufacturing, logistics and professional services. More information is available at federalmanagement.co.uk.
About Frontline Collections Frontline Collections is an expert FCA-regulated debt recovery agency specialising in consumer and smaller commercial debt recovery, including sectors such as private schools, healthcare and veterinary services, across the UK. More information is available at frontline-collections.com.
