Late Payments Driving Construction Firm Closures
Late payments aren’t just frustrating, they are a serious threat to survival and are forcing an estimated 14,000 UK businesses to close every year. Construction is worse hit.
There are the equivalent to 38 closures every single day, as cash-strapped firms struggle to survive unpaid invoices.
New analysis from Funding Circle reveals that combining UK business data with research from the Small Business Commissioner shows which industries and locations are hit the hardest.
Construction
Construction is the sector most exposed, with over 2,100 firms estimated to have closed in 2024 due to delayed payments, driven by long payment chains and thin margins. Professional services, wholesale and retail and administrative sectors also face significant risks.
The impact is uneven across regions. London leads with more than 3,000 late-payment-related closures, followed by the South-East (1,950) and North-West (1,500).
Collection time
Micro and small businesses, already under pressure from rising costs and tighter margins, are disproportionately affected. All firms spend an average of 86 hours annually pursuing money they are already owed. That lost time translates into almost £7 billion (The average labour cost estimate is £16.92 per hour) a year in direct costs to businesses, factoring in staff time, legal fees, debt collection and emergency financing used to plug cashflow gaps.
28% of firms are affected each year, impacting more than 1.5 million businesses nationwide.
£Billions owed
Collectively, UK businesses are owed around £26 billion in overdue payments at any given time. For the average affected business, this means waiting on £17,000 in unpaid invoices. This is cash that could otherwise be used to pay staff, invest in growth or keep day-to-day operations running smoothly.
Businesses struggling with late payments reportedly face higher closure rates than similar firms without such issues. In 2024, around 280,000 businesses closed in the UK, meaning roughly 1 in 20 of these closures were likely caused directly by late payments.
Why fixing payment culture matters now
With 84% of late payments coming from UK customers, the research highlights a clear opportunity for economic improvement through better payment practices. The analysis suggests that reducing poor payment behaviour by just 10% could deliver nearly £1 billion in economic benefits every year through fewer closures, higher investment and improved productivity.
Risky business
For business owners, late payments aren’t just a temporary cash issue, they increase risk, reduce resilience and limit opportunity. Every hour spent chasing invoices is time not spent growing the business, hiring staff or improving products and services. Payment uncertainty makes planning harder and undermines confidence in future investment.
FlexiPay
FlexiPay from Funding Circle gives business owners the flexibility to manage cash flow, ensuring that even if invoices are delayed or unpaid, they have the funds to keep operations running smoothly.
Picture: Late payments are damaging SME construction firms and putting many out of business.
