Positive jobs growth overshadowed by late payments for UK small businesses
Despite increasing job growth, small businesses experienced slow sales growth and rising late payment times in the three months to September, according to the latest data from global small business platform Xero.
Xero’s small business index showed that London’s SMEs demonstrated the second strongest job growth in the country over the last quarter, with a 2.5 per cent boost year-on-year.
After seeing the first jobs growth of the year in June, a further increase of 0.8 per cent year-on-year last quarter marked four months of consecutive employment gains for small businesses.
However, London experienced a starker slump in sales growth compared to the rest of the country, as well as higher late payments figures, putting its business owners and operators under pressure.
Sales in London grew 0.2 per cent year-on-year in September, unusually below the national average of 1.1 per cent, given London typically performs better than the rest of the country.
Nationally, sales grew 2.1 per cent across the last three months, a stark fall from the average of 7.3 per cent in the first half of 2023.
On average, payments to London small businesses were made 9.7 days late in September, much higher than the national average of 7.7 days late – the highest level observed by the Index in three years.
Alex von Schirmeister, Xero’s UK managing director, said: “It’s completely unacceptable that late payment times are back to where they were three years ago. When businesses are paid late, it is harder for them to pay their own bills and manage their cash flow let alone invest in growth.
“We need to see this late payments data trending down and we hope the full output of the UK Government’s Late Payments Review will bring positive change.”
Adam Cozens, managing director and co-founder of east London coffee wholesaler Perky Blenders, told City PM: “As a wholesale coffee retailer, late payments and broader cash flow issues significantly impact how we manage stock levels. This really affects our ability to meet demand over busy periods, which is particularly worrying ahead of the festive season.
“If we are hit by late payments earlier in the year, we can’t afford to bulk order in October. This hugely limits sales and growth during our most important sales period.
“Late payments also have a knock-on effect on our supply chain…one late payment can have a trickle-down effect and potentially compromise the entire supply chain.
“We can’t afford to risk these relationships – and our subscribers – due to late payments.”