British Businesses Face Cash-Flow Crisis From Late Payers

Posted by: John Tozzi on December 12, 2011

Earlier this year, we reported that the cash-flow crisis for small business is a lasting legacy of the recession. The problem isn’t limited to the United States, though.

Business groups in Britain want to draw attention to the problem of late payments, with some companies taking four months or longer to pay invoices, the U.K. newspaper The Telegraph reports.

Reporter James Hurley cites data suggesting that small and midsize British companies are owed as much as 33 billion pounds in unpaid invoices, and large companies often take longest to pay. Companies are afraid to act against late payers because they don’t want to lose the business, the paper says:

An EU directive setting 30 days as the standard payment term and labelling anything longer than 60 days as potentially “grossly unfair” is expected to take effect in 2013, although the [Forum of Private Business] noted that a “culture of fear” of being blacklisted for future work rendered existing late payment legislation, which allows companies to charge interest on overdue bills, underutilised.

The story notes that many businesses voluntarily agree to longer payment times. That may be understandable, if the choice is between getting paid in four months or not getting the job.