#Economic publications

How UK SMEs Are Being Impacted by Late Payments in 2026

12 / 11 / 2026

Late payments continue to be one of the biggest challenges facing UK businesses, but the impact is often felt most by small and medium sized businesses (SMEs). For many businesses of this size, delayed customer payments are more than an administrative frustration. They represent a growing source of customer payment risk that can place pressure on cash flow, profitability and future growth.

Why Late Payments Matter More for SMEs 

Late payments can affect businesses of any size, but the consequences are often more significant for SMEs. This is because many smaller businesses operate with tighter cash flow margins and rely on customer payments arriving when expected to meet their own financial commitments. 

When payments are delayed, SMEs may face difficult decisions around supplier payments, recruitment plans, investment projects or access to additional financing. Even profitable businesses can experience financial pressure if cash becomes tied up in overdue invoices for extended periods. 

The 2026 Coface Payment Survey Highlights Growing Payment Pressures 

Amid these challenges, recent findings from the 2026 Coface Payment Survey suggest that payment behaviour is moving in the wrong direction for many UK businesses.  

The research suggests that businesses are not only waiting longer to be paid, but many also expect payment behaviour to deteriorate further over the coming year. 

Key findings include: 

  • 90% of UK businesses experienced at least one late payment
  • Late payments were overdue by an average of 34 days
  • More than half of businesses reported payment delays occurring more frequently than a year ago
  • 57% expect payment behaviour to worsen over the next 12 months
  • Among micro and small businesses, 61% expect payment delays to increase. 

For SMEs, these findings reinforce a growing concern. As payment terms lengthen and delays become more frequent, cash remains tied up for longer periods, reducing available working capital and making it more difficult to invest in growth, absorb unexpected costs or respond to new business opportunities. 

Why SMEs Feel the Impact More Than Larger Businesses 

While overdue invoices affect businesses of all sizes, SMEs often have less room to absorb the impact when payments arrive late. A single large overdue invoice can create immediate pressure across multiple areas of the business, affecting everything from supplier relationships to growth plans and day-to-day cash flow management. 

For businesses operating with limited working capital, delayed customer payments can quickly ripple throughout an organisation, creating operational challenges that extend far beyond the finance team. 

A significant overdue invoice can affect: 

Business Area Potential Impact 
Cash Flow Reduced working capital 
Supplier Payments Delayed obligations 
Employees  Increased pressure on staffing budgets and recruitment plans 
Growth Plans Postponed investment 
Borrowing Requirements Greater reliance and higher financial costs  

 This is why late payments are often more than a simple administrative issue. For some businesses, they can become a serious financial risk.  

Late payments can create costs beyond the value of the overdue invoice itself 

The real cost of late payments often extends far beyond the value of the overdue invoice itself. In many cases, the financial impact can exceed the cost of implementing preventative risk management measures designed to reduce exposure to customer non-payment. For many businesses, understanding how much trade credit insurance costs for SMEs can be an important part of evaluating how best to manage customer payment risk. 

When cash is delayed, businesses may have to: 

  • Delay investments in growth
  • Reduce hiring plans
  • Stretch supplier payments
  • Increase borrowing
  • Spend valuable time chasing debtors 

Many SMEs underestimate the hidden operational costs associated with collecting overdue payments, including the time spent pursuing invoices that could otherwise be invested in business growth, customer acquisition or strategic planning. 

There is also the risk that a late payment becomes something more serious. A customer experiencing financial difficulties today may become an insolvency case tomorrow. In these situations, what begins as a delayed payment can ultimately result in bad debt. 

Why Customer Payment Behaviour Is Getting Worse 

Several factors are contributing to worsening payment behaviour across UK businesses. Customer financial difficulties remain a significant driver, while ongoing geopolitical uncertainty and economic pressures are creating additional challenges throughout supply chains. 

Findings from the Coface Payment Survey suggest that recent geopolitical developments continue to affect payment timing within business relationships. Around three-quarters of respondents reported disruptions impacting payment behaviour, with cash flow pressures and delivery delays among the most frequently cited consequences. For SMEs in particular, these external pressures can create a difficult trading environment. Customers may seek longer payment terms to manage their own cash flow challenges, while SMEs often need access to working capital more quickly to fund day-to-day operations and future growth. 

How Can SMEs Assess and Manage Customer Payment Risk?  

While late payments cannot always be prevented, SMEs can take steps to better understand the level of risk within their customer portfolio and identify potential issues before they have a significant impact on cash flow. This starts with understanding who you are trading with. Reviewing a customer's financial stability, payment behaviour and creditworthiness through reliable business information can help businesses make more informed decisions when offering credit terms. 

However, customer risk is not static, and changing market conditions, sector challenges or financial pressures can all affect a customer's ability to pay over time. For many SMEs, managing customer payment risk is also about considering what would happen if a key customer failed to pay altogether.  

As explored in our article, Why Is Trade Credit Insurance Essential for Small Businesses?protecting cash flow is often just as important as generating new sales. Trade credit insurance can help businesses trade with greater confidence by protecting against customer non-payment while also providing access to business information, customer monitoring and debt collection support.  

Solutions designed specifically for SMEs, such as EasyLiner, combine these services within a single trade credit insurance policy. This trade credit insurance solution can help SMEs strengthen their credit management processes, improve visibility over customer risk and reduce the financial impact of unpaid invoices, allowing them to focus on growth rather than chasing overdue payments. As payment pressures continue to increase, taking a more proactive approach to managing customer risk could play an important role in protecting cash flow and supporting long-term business growth. 

Want to understand whether trade credit insurance could be right for your business? Get an immediate EasyLiner quote online and see how much protection could cost. 

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