Research / Research Reports

UK Late Payments Report 2026

Key Findings

• iAn estimated £50 billion in business invoices is overdue in the UK at any one time
• iSMEs spend an estimated 1.5 million working days per year chasing late payment
• i50,000 UK businesses are estimated to close each year primarily due to cash flow problems caused by late payment
• iThe average UK SME is owed approximately £25,000 in overdue invoices at any given time
• iConstruction, manufacturing, and professional services have the longest payment terms and worst late-payment records
• iLate payment is most acute in supply chains where large companies use smaller suppliers as implicit working capital funding
• iInvoice finance is the most direct structural solution, effectively bringing payment forward regardless of customer behaviour

The scale of the problem

Late payment has been recognised as a structural problem in the UK economy for over two decades, yet it persists despite legislative interventions including the Late Payment of Commercial Debts (Interest) Act 1998 and the introduction of the Prompt Payment Code. The fundamental dynamic has not changed: larger, more powerful buyers routinely extend payment terms beyond what is agreed in contracts, and smaller suppliers absorb the cost to protect commercial relationships.

The Federation of Small Businesses (FSB) and the Chartered Institute of Credit Management (CICM) have repeatedly quantified the problem. The headline figure of £50 billion in overdue invoices represents approximately 2.5% of UK GDP. For individual SMEs, the impact is far more acute: the average SME is owed approximately £25,000 in late invoices at any time - money that could otherwise be invested, used to pay suppliers, or simply provide financial resilience.

The human cost is significant. SME owners and finance directors spend substantial time on credit control and debt chasing that could be directed to growth activities. In businesses where invoicing represents the primary revenue recognition mechanism, late payment effectively creates a time lag between delivering services and being able to operate with the proceeds.

Sectors most affected

Late payment is not evenly distributed across sectors. Construction has consistently been identified as the sector most severely affected, with payment delays endemic throughout supply chains. Main contractors routinely take 60-90 days to pay subcontractors, and project retentions (typically 3-5% of contract value held back until defects liability periods expire) can represent significant working capital tied up for months or years.

Manufacturing businesses face acute late-payment problems where they sit in supply chains serving larger retailers or distributors. The asymmetric power relationship - where the manufacturer is dependent on a small number of large customers - makes asserting contractual payment terms commercially difficult. Manufacturing businesses often fund their customers' working capital involuntarily.

Professional services firms - solicitors, accountants, consultancies - typically have high invoice values and relatively long debtor day cycles. The unbilled work-in-progress problem is acute: revenue earned but not yet invoiced, combined with invoiced revenue not yet paid, creates significant working capital requirements.

Finance solutions for late-payment management

Invoice finance is the most direct structural solution to late payment. Rather than waiting 60 or 90 days for customers to pay, businesses access 70-90% of invoice value within 24-48 hours of raising the invoice. The remaining balance (less fees) is received when the customer pays. This effectively decouples the business's cash flow from customer payment behaviour.

Invoice factoring (where the lender manages credit control) and invoice discounting (where the business retains credit control) are the two main variants. Factoring can also reduce the time business owners spend chasing payment - the lender's credit control team takes on that function. Discounting maintains the confidentiality of the arrangement.

For construction businesses specifically, contract finance and construction invoice finance products exist that can accommodate retentions and applications for payment. These specialist products require understanding of the JCT or NEC contract structure and are available from a small number of specialist lenders on the Spark Finance panel.

Methodology

This report draws on data from the Federation of Small Businesses (FSB), the Chartered Institute of Credit Management (CICM), the Department for Business and Trade, Experian, and Spark Finance's own client data. Statistics about overdue invoices and business closures are estimates from published surveys and research; they should be treated as indicative rather than exact measures. This report is updated annually.

Disclaimer: This report is produced by Spark Finance for informational purposes and does not constitute financial or legal advice. Spark Finance is a credit broker, not a lender. FCA Authorised, FRN 958123. Statistics cited from third-party sources should be verified against primary sources.

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