New research by Bibby Financial Services (BFS) has shown that the average bad debt amongst UK small and medium-sized enterprises (SMEs) has increased by 61% in the past year.
The rise in bad debt is due to rising insolvencies, which are putting the futures of SMEs at risk. According to the research, 1.5 million (or 27%) of SMEs are currently struggling with this issue.
The BFS survey also found that almost half of businesses surveyed (47%) have seen at least one business customer cease to trade in the last six months alone, and a quarter (25%) have seen three or more customers become insolvent.
Six in 10 businesses (60%) say it’s taking longer for customers to pay their invoices in full compared to a year ago, and 29% are worried about how long it’s taking for invoices to be paid.
Additionally, SMEs are struggling to access finance to continue operating, with three in five businesses surveyed saying it’s harder to secure a loan today than during the pandemic.
Bibby Financial Services is urging the Government to relaunch the Bank Referral Scheme to boost SME funding.
Derek Ryan, UK managing director of Bibby Financial Services, said: “Rising insolvencies are causing huge ripple effects throughout supply chains across the country, leading to greater levels of bad debt for small and medium-sized businesses… It’s more important than ever that businesses shore-up their credit control processes and look for ways to protect themselves against insolvency in their supply chains… More than ever, SMEs need to be able to access the funding they need to operate from a variety of sources.”
