Almost 40 per cent of small businesses in the North West are paid late by their larger counterparts, a new study has revealed.

According to research from the UK Small Business Commissioner and Lloyds Bank Commercial Banking, 39 per cent of invoices issued by small businesses in the region are paid two days later than the national average, and nine days later than the Commissioner’s recommended exemplar of 30 days.

Larger businesses take an average 39 days to pay up, compared to the national average of 37 per cent – making the North West one of the worst region in the UK, according to the research.

Small Business Commissioner, Paul Uppal, is now pushing for a traffic light warning system to be introduced that gives small firms a signal about which large businesses pay their bills late.

He accused larger companies that take longer than 30 days to pay of using their supply chain to finance businesses, while at the same time holding back their smaller counterparts.

Mr Uppal, said: “The effect of late payment on small firms in the North West can be devastating. 

“It impedes business growth, but also has an impact on the lives and mental health of those running small firms.
“Our initial findings indicate that almost two thirds of payments are likely to be owed to smaller firms at any time. 

“This is money that could be used to grow smaller businesses and generate tangible economic activity. Instead it is stuck on large firms’ business ledgers doing nothing.

He added: “There has been a requirement to report this information for nearly two years, and some businesses have now made two reports. 

“The challenge now is to use the information to help small firms make sound decisions based on transparent information before deciding which larger businesses they should trade with. 
“A traffic light system would be a simple and effective way of demonstrating which larger firms have structured their supply chain in such a way that it is more than an exchange of good or services but also resembles part of their financing model.”
The research used data from the official payment reporting returns based on the annual reports of 7,010 large businesses.

Large businesses in Yorkshire and the Humber came out worst, with and average payment time of 43 days, followed by Northern Ireland and East Midlands, which both had an average payment time of 41 days.

Meanwhile, companies in London (34 days) and the South West (35 days), were the most prompt.

Ed Thurman, managing director of Global Transaction Banking at Lloyds Bank Commercial Banking, said: “We have discovered wide variations in payments depending on where businesses are located. 

“For some businesses two weeks can be critical in the financial well-being of a smaller businesses. Businesses could consider utilising invoice financing products to mitigate these challenges.”