Manufacturing SMEs call for action on late payments ahead of budget

UK manufacturing firms are urging the Government to tackle the late payments crisis, as new research from independent funder Bibby Financial Services (“BFS”) reveals the dual pressures of unpaid invoices and high costs are hampering the sector.

According to BFS’s latest SME Confidence tracker, nearly six in ten (59%) manufacturers report that current measures to reduce late payments, including the Fair Payment Code, don’t go far enough to protect them. The sector remains the most critical of Government support for late payment across all industries surveyed.

The data reveals SME manufacturing firms are currently owed an average of £76,000 in unpaid invoices, and more than sixty per cent (61%) say customers are taking longer to pay them in full compared to a year ago. Further, manufacturing businesses were more likely to suffer bad debt – due to non-customer payment or protracted dispute – than any other sector (34% vs a cross-sector average of 29%). 

Derek Ryan, UK Managing Director at BFS commented, “SME manufacturing firms are under pressure from late payment and bad debt, which combined put a significant strain on cashflow. Despite a glimmer of optimism in recent months, market conditions remain tough, with producer input and output prices rising annually.”

Notwithstanding the recent drop in inflation, which raises hopes of an interest rate cut in December, late payments are exacerbated by high costs with more than six in ten (64%) SME manufacturing firms reporting this as a key challenge to their business - the highest of any sector surveyed, ahead of construction, services and transport. 

Ahead of the Chancellor’s Budget, the data highlights specific measures manufacturing decision makers would like the Government to deliver. This includes reduced business rates or corporation tax (23%), as well as prioritising low-interest loans or grants for business expansion and job creation (23%). Nearly half (49%) said they are delaying investment decisions until after the Budget, underlining the need for greater policy certainty for small businesses.

Derek Ryan added: “The Chancellor must act decisively in her Budget to unlock, not hinder, growth for the manufacturing sector. More broadly, the Government still must deliver on the investment intentions it laid out in its Industrial Strategy too to give the manufacturing sector a fighting chance of being able to grow and thrive in 2026 and beyond.”