Late payments are ‘a fundamental threat’ to small businesses

A map of the British Isles and Ireland with pins dropped to show locations of the best and worst areas for late payment of invoices.

Almost two-thirds of invoices sent by UK small businesses in the past year were paid late, new research by FreeAgent shows. The study analysed millions of invoices from FreeAgent’s 200,000-plus customers to uncover the scale of the late payments crisis faced by small businesses.

It reveals “a serious and growing challenge” for small businesses, says FreeAgent CEO Roan Lavery, one that’s “not just inconvenient, it’s a fundamental threat to business survival and growth”.

“It’s vital that we see action from both policymakers and the business community to create a culture of prompt payment and to support small businesses in embracing digital tools that can protect their cashflow,” he adds. “Late payments hit hardest at the very businesses that are driving our economy, making it harder for them to plan, invest, and meet their own obligations.”

The UK’s Small Business Commissioner, Emma Jones CBE, admits the new figures “paint a bleak picture”. Late payments cost the UK economy £11bn annually, according to official government statistics.

“We know that, on average, 38 businesses close every day as a result of late payment - this isn’t just an inconvenience,” says Jones. “Late payment is a complex issue, exacerbated by a challenging economic environment, and we are working on all the elements to try and get money moving faster to small firms.” 

A payment postcode lottery 

While no area in the UK avoided the epidemic of late payments, FreeAgent’s data revealed a postcode lottery in which some areas saw truly shocking rates of late payments. The Southall postcode area was the worst affected, with 77.9% of invoices unpaid by the due date. Following close behind were the Blackburn area (73.6% of invoices paid late), the Nottingham area (73.2%) and the Belfast postcode area, which covers all of Northern Ireland (72.8%). 

Only three postcode areas saw more than half of invoices paid on time. In the Ipswich area, which our research found had the lowest rate, 31.5% were paid late, followed by Llandrindod (41.7%) and Taunton (48.9%). In every other UK postcode area, more than 50% of invoices were paid late.

Unreliable cashflow makes it extremely hard for businesses to predict income and plan for stability and growth. This is a significant problem for small businesses (those with 0-49 employees), which employ 47% of the UK workforce and have a turnover of £1.9tn. 

FreeAgent’s latest Small Business Monitor (Spring 2025) found more than a third of our customers (34.9%) have waited up to three months for payment. More than one in 10 (10.3%) have been forced to write off sums between £1,001 and £5,000, from invoices that were never paid.

Government attempts to tackle ‘scourge’ of late payments

Emma Jones was appointed Small Business Commissioner last June, as part of the government’s efforts to tackle the “scourge” of late payments. The government claims their package of new measures - which also includes launching a new Fair Payment Code and plans to require large companies to include their payment performance in annual reports - “amounts to the most significant legislation to tackle late payments in over 25 years”.

The Department for Business and Trade is currently seeking small businesses’ views on the proposed new laws - to have your voice heard, fill in the Late payments consultation before 23rd October.

Postcode areas with the most late payments

  1. Southall (UB): 77.9%
  2. Blackburn (BB): 73.6%
  3. Nottingham (NG): 73.2%
  4. Belfast (BT): 72.8%
  5. Harrow (HA): 72%
  6. St Albans (AL): 72%
  7. Telford (TF): 69.7%
  8. Halifax (HX): 69.5%
  9. Oldham (OL): 69.4%
  10. Motherwell (ML): 69.3%

Postcode areas with the fewest late payments

  1. Ipswich (IP): 31.5%
  2. Llandrindod (LD): 41.7%
  3. Taunton (TA): 48.9%
  4. Hereford (HR): 52.1%
  5. Dumfries (DG): 52.3%
  6. York (YO): 54.1%
  7. Inverness (IV): 54.5%
  8. Swindon (SN): 54.7%
  9. Derby (DE): 56.4%
  10. Lancaster (LA): 56.5%

See ahead with FreeAgent

Make more confident business decisions with FreeAgent’s 90-day cashflow forecast. Find out more here.

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