UK freelancers and small business owners continue to be plagued by the problem of late payment, according to new research.

Analysis of invoices sent by accounting software company FreeAgent‘s small business customers between June 2022 and June 2023 has revealed the startling impact of late payment on the UK’s SME sector – with just under half (43%) of invoices sent over the past 12 months were paid late.

The research shows that Harrow is the area worst affected by the late payments crisis – with 64% of invoices sent during the past year paid late – closely followed by Guildford, Nottingham and Liverpool. In contrast, Ipswich is least affected by late payment, with just 5% of invoices sent by small businesses within the IP postcode paid late.

Looking at the national picture, both England and Wales have the lowest rate of late payment (43% of invoices paid late), closely followed by Scotland. In contrast, Northern Ireland is the worst nation in the UK for late payment, with 55% of invoices sent over the past 12 months paid late.

While the results show a slight improvement to the same research conducted by FreeAgent in 2020 – when 46% of UK invoices were paid late – they show that late payment is still one of the biggest challenges facing UK SMEs three years later. The company believes that the late payment issue is especially perilous as many SMEs are still recovering from the effects of the COVID-19 pandemic and struggling with the ongoing cost-of-living crisis.

Roan Lavery, CEO and co-founder of FreeAgent, said: “While it’s certainly positive to see a slight drop in the level of late payment compared to 2020, it remains the case that around half of invoices are still not being paid on time. That represents a huge number of SME owners and freelancers whose businesses are unnecessarily being put in jeopardy.

“Maintaining a healthy cash flow is the number one priority for anyone running a business and, if you’re not being paid on time for the work that you do, it can be incredibly difficult to do this. The vast majority of small businesses simply don’t have the luxury of being able to absorb late payments into their accounts – they need to get paid promptly to keep themselves afloat.

“Our data shows that around half of the invoices sent by small businesses in the UK get paid late, and there are certain areas where the issue is considerably worse. Some of these late payments go way beyond a week or two, with some invoices taking months to settle or even not being paid at all.

“In our current volatile economic climate, and with business owners continuing to feel the impact of high inflation, interest rates and the cost-of-living crisis, it is more important than ever for them to be protected. Late payment should be one of the biggest priorities for the government to tackle, so we urge them to introduce new legislation and significant penalties to help tackle the issue once and for all.”

A separate survey of small business owners conducted by FreeAgent has also revealed some of the potential legislative solutions that SMEs would like to see implemented to tackle late payment in the UK.

Among the most popular solutions were better access to legal aid and services, harsher financial penalties for late payers, mandating the Prompt Payment Code for all private sector contracts and the introduction of an official star rating showing how quickly companies pay their clients. In addition, a quarter of business owners surveyed said they would like to see the government create a new, dedicated fund to protect small businesses from late or non-payers.

The survey also highlighted SME dissatisfaction with politicians over the issue, with 61% of respondents saying they did not think the government was taking the issue of late payment seriously – and 38% saying they did not know whether it was. In contrast, just 1% of people surveyed said they thought the government was committed to helping SMEs deal with late payment.