There may well be ‘no place for sentiment in business’, but sentiment could be the reason that late payment has worsened since the Brexit vote.

Ten percent of UK SMEs have seen a worsening in payment terms following the EU referendum in June 2016, according to research by alternative finance platform provider Crossflow Payments and YouGov. Of the 1,000 SME senior decision-makers questioned, 31% expressed concern about the impact of Brexit negotiations on their business, while 20% were worried about currency fluctuations.

“While the sterling exchange rate change has had an effect, it also appears that something ‘softer’ has happened – which has adversely impacted payment terms,” Crossflow CEO Tony Duggan told SCF Briefing.

With more than half (55%) saying they regularly receive payment ten or more days later than agreed, Crossflow estimates that a staggering £266bn is locked up in late payments.

“A handbrake on SMEs”

“Delays in receiving payment promptly from customers is acting as handbrake on SMEs, preventing them from making key investment decisions for the future, and ultimately stunting growth,” Duggan added. “In 2017, it should no longer be the case that businesses face such hurdles.”

He does see some light at the end of the tunnel, however. Corporates, he believes, have stepped up their efforts to understand supply chain risk and financing – with the UK government’s new reporting rules on payment practices helping to focus their minds. “They’re recognising that existing financing services don’t work particularly well, but they have options to leverage their own credit rating and facilitate financing to the supply chain.”

The new disclosure rules came into effect on 6 April, requiring large businesses to report publicly twice a year on their supplier payment practice, policies and performance. The legislation also calls on them to say whether they use supply chain finance or e-invoicing with suppliers.