UK SMEs are owed £70.4bn in late payments, despite Fair Payment Code

Late payments are costing the UK economy billions every year, while leaving small businesses struggling to stay afloat.

To tackle this, the Office of the Small Business Commissioner (OSBC) launched the Fair Payment Code in late 2024 –  helping businesses get paid on time and improve their cash flow.

But while the new code has been met with high levels of confidence, there is still a significant late payment problem, with research from Hiscox revealing that SMEs are collectively owed £70.4bn.

This shows that even with new initiatives in place, many firms continue to face cash flow challenges, unpaid invoices, and the administrative burden of chasing payments.

What is the Fair Payment Code?

The Fair Payment Code is a voluntary code that encourages quicker and fairer payments across UK businesses. Backed by the Government, it’s designed to address the widespread problem of late payments for many SMEs.

Replacing the Prompt Payment Code, the FPC is open to businesses of all sizes. To reward strong payment practices, it offers a three-tier award system (Gold, Silver, and Bronze) based on how quickly companies pay their suppliers. 

To achieve Gold, a business must pay at least 95% of invoices within 30 days and demonstrate strong payment practices. Meanwhile, Silver is awarded to firms that pay at least 95% of invoices within 60 days while showing a commitment to fair and transparent processes. At the bottom of the tier, Bronze recognises companies that meet the 60-day deadline and are actively working towards faster payment times.

“As we move toward celebrating its first year, I’m hopeful the Code will continue to gain momentum as a kitemark of payment good practice, attracting companies of all sizes to apply and be duly recognised.” Emma Jones, Small Business Commissioner, wrote on SME Web.

The cost of late payment to SMEs

Despite ongoing efforts to improve payment practices, late payments remain a persistent and costly issue for small businesses across the UK. 

New research by business insurance company Hiscox found that the majority of small firms are optimistic about the code, but late payments are still persisting.

In a survey of 1,000 small business owners and sole traders, 62% of respondents said they feel positive about the FPC.

However, it also found that with 5.7 million small businesses in the UK, outstanding payments across the country could total £70.4bn all together –an average of £12,357.38 per business each year.

In late 2025, it was reported that 90% of companies experienced late payments in the past year, with the average delay being 32 days. The Federation of Small Businesses also found that 63% of firms were spending time chasing overdue payments, costing up to £5,200 per year in lost time and resources.

This has inevitably led to serious cash flow problems and even drastic measures for SMEs, as data from Companies House reveals that 38 businesses close every day due to late payments – a concerning reminder of the real and ongoing impact delayed invoices can have on the survival of small firms.

How should SMEs tackle late payments?

While schemes like the FPC are helping to encourage quicker payment, business owners are still having to seek support and adopt practical strategies to ensure they get paid on time.

Sending payment reminders was the most common approach, used by 48% of respondents in the Hiscox survey. Other popular options include chasing directly via phone or email (44%), withholding any other pending goods or services (29%), and charging a late payment fee (28%).

Meanwhile, small businesses are also turning to third-party support, with 14% prepared to take legal action and 11% planning to escalate to a debt collection agency.

Another viable solution is to contact the OSBC directly, as they can offer advice, help you pursue unpaid invoices, and step in to handle former complaints if payment disputes arise.

Richard Stone, Founder and Managing Director of PR agency Stone Junction, also shares tips for tackling late payments and keeping cash flow healthy.

“One trick is to issue invoices at the very end of the month rather than the beginning,” he advises. “This sounds small, but it can stop you being kicked into the next payment cycle.” 

“We also always clarify terms upfront, chase promptly, and never assume silence means payment is on the way.

“Ultimately, getting paid on time isn’t just about process, it’s about people. Be professional, be clear, and be proactive.”

Get paid with Emma

Emma Jones is the UK’s Small Business Commissioner, helping businesses get paid on time by tackling late payments and poor payment terms. Read her bi-monthly column for Startups now.

Get paid with Emma