British business crunched by bad debt

Thursday, 25 September 2008 06:09

Two thirds of British businesses are being hit by late payments and are four times as likely to be owed money than French firms.

Research by credit information service Creditsafe reveals 66 per cent of British businesses have reported late payments, but only 16 per cent of French companies has experienced the same problem.

However, of the 16 per cent of French companies hit by bad debtors, the average amount owed is ?59,949 (£47,377.62), 64 per cent higher than the average £28,844 owed to British companies.

The reason for the higher bad debts in France is that firms owing cash is a problem which mainly affects larger companies.

In France, late payments have only been suffered by 11 per cent of businesses with less than ten employees. This figure rises to 41 per cent for companies with ten or more employees.

In Britain late payment of debts is a problem which is endemic in businesses of all sizes.

Some 53 per cent of sole traders complain they suffer from late payments, a figure which rises to over 97 per cent of companies surveyed of between 50 and 250 employees.

David Knowles, marketing director, Creditsafe, said: "We have seen late payments become a part of the business culture here in the UK.

"Companies concerned about cash flow, especially when access to business credit is increasingly restricted and expensive, want to ensure monies remain within their enterprise for as long as possible to ensure business liquidity. "

He added: "Many companies also delay payment of their invoices as they can use the funds to earn additional interest. Unfortunately, this practice has a knock on effect which can have severe consequences.

"It's often less cash rich smaller companies that end up losing out. We therefore urge companies to be very careful in their choice of trading partners."

Some 39 per cent of British firms said late payments had hit their profitability, and 30 per cent of small businesses said late payment meant they themselves could not meet bills.

A total of three per cent of firms have been forced to cease trading due to late payments from others and a further three per cent were forced to lay off staff.

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