Article by Index Digital Team | 13th March 2026

South East Hit As Late Payments Cost UK Economy £11bn a Year

London and South East businesses face the highest risk of closure from late payments, new research finds.

Image Photo by SumUp on Unsplash

Late payments aren’t just frustrating for UK businesses – they are a serious threat to survival. New analysis from Funding Circle, combining UK business data with research from the Small Business Commissioner, shows late payments cost the UK economy almost £11billion annually, contributing to around 38 business closures every day.

The impact is felt across the country, but some regions are more exposed than others. London leads the way, with an estimated 3,050 business closures linked to late payments in 2024 alone, followed by the South East (1,950 closures) and the North West (1,500 closures). For micro and small businesses already under pressure from rising costs, shrinking margins and increased taxation, late payments can be the tipping point.

28% of firms are affected each year, impacting more than 1.5 million businesses nationwide.

Collectively, UK businesses are owed around £26billion in overdue payments at any given time. For the average affected business, this means waiting on £17,000 in unpaid invoices – cash that could otherwise be used to pay staff, invest in growth or keep day-to-day operations running smoothly.

Research finds that micro and small businesses bear the greatest burden. Late payments account for 4.61% of annual turnover for micro businesses and 1.47% for small businesses. While the absolute value of late payments is typically lower for smaller firms, a far greater proportion of their turnover is tied up in unpaid invoices.

Productivity drain: 133 million hours lost chasing invoices

Late payments don’t just restrict cash flow – they also drain productivity. UK businesses lose an estimated 133 million staff hours each year chasing overdue invoices, with affected firms spending an average of 86 hours annually pursuing money they are already owed. 

That lost time translates into almost £7billion (the average labour cost estimate is £16.92 per hour) a year in direct costs to businesses, factoring in staff time, legal fees, debt collection and emergency financing used to plug cashflow gaps.

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Late Payments Shut Down 38 UK Businesses a Day, Putting 40,000 Jobs at Risk

Late payments are forcing an estimated 14,000 UK businesses to close every year – equivalent to 38 closures every single day – as cash-strapped firms struggle to survive unpaid invoices. Businesses struggling with late payments reportedly face higher closure rates than similar firms without such issues. In 2024, around 280,000 businesses closed in the UK, meaning roughly 1 in 20 of these closures were likely caused directly by late payments.

London recorded the highest number of closures tied to late payments, with more than 3,000 businesses estimated to have failed as a result, followed by the South East (1,950), North West (1,500) and East of England (1,350). These regions account for a disproportionate share of late-payment-driven business failures, underscoring how deeply the issue is embedded in the UK’s commercial landscape.

Construction has emerged as the sector most at risk

Construction has emerged as the sector most at risk, with over 2,100 firms estimated to have closed in 2024 due to delayed payments, driven by long payment chains and thin margins. Professional and technical services, wholesale and retail, and administrative and support services also feature heavily.

Why fixing payment culture matters now

With 84% of late payments coming from UK customers, the research highlights a clear opportunity for economic improvement through better payment practices. The analysis suggests that reducing poor payment behaviour by just 10% could deliver nearly £1billion in economic benefits every year through fewer closures, higher investment and improved productivity.

For business owners, late payments aren’t just a temporary cash issue – they increase risk, reduce resilience and limit opportunity. Every hour spent chasing invoices is time not spent growing the business, hiring staff or improving products and services. Payment uncertainty makes planning harder and undermines confidence in future investment. FlexiPay from Funding Circle gives business owners the flexibility to manage cash flow, ensuring that even if invoices are delayed or unpaid, they have the funds to keep operations running smoothly.

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