Late payments are draining an estimated £11bn from the UK economy annually, with small businesses waiting an average of 27 days after issuing invoices before receiving payment.
Research from Sage shared with City AM found that 49 per cent of SME invoices are paid late, leaving firms across the country starved of the cashflow they need to operate and grow.
The findings arrive as the government pushes its Late Payments Bill through Parliament and intensifies efforts to reform payment practices across British business.
Blocked cashflow is preventing many firms from investing in new technologies at a time when ministers are placing growing emphasis on productivity and digital transformation as drivers of economic growth.
Despite the sustained pressure on cashflow, the UK’s small business sector continues to show notable signs of resilience across key financial metrics.
Sage’s latest UK SME Pulse data found profits across UK SMEs grew 7.4 per cent in the year to the first quarter of 2026, the strongest rate of growth since 2022.
Real revenues also increased by 3.2 per cent over the same period, marking a fourth consecutive quarter of growth for the sector.
Business groups argue that stronger payment practices could unlock significantly more investment and growth beyond the gains already being recorded.
The late payment problem carries particular weight as policymakers seek to accelerate technology adoption among smaller businesses across the country.
Separate research published this week found only 21 per cent of UK small businesses use artificial intelligence regularly, while just six per cent have embedded AI into everyday operations.
Cost remains the single biggest barrier to AI adoption, cited by 53 per cent of firms, followed by skills shortages and concerns around data privacy.
Stronger cash positions could allow far more firms to invest in productivity-enhancing technologies, digital tools, and AI systems that remain out of reach for many.
The government is also betting on e-invoicing as part of its solution to the chronic late payments problem affecting smaller firms.
Set to be introduced from 2029, e-invoicing enables invoice data to move directly between buyers’ and suppliers’ financial systems, cutting delays at source.
According to Sage, businesses already using e-invoicing are typically paid between five and seven days faster than those relying on traditional invoicing processes.