Late Payments Wring Out North East Small Businesses

Small businesses in the North East are being strangled by late payments, according to research from the Federation of Small Businesses. In early 2025, FSB found that 60% of small businesses say late payments hold them back from reaching their full potential.

A third of owners feel they have little control over this problem. When margins are tight and overheads don't wait, one overdue invoice from a larger client can lead to missed supplier payments, overdraft charges, and growth put on hold.

The government has made some promises, but there's still a gap between what's written down and what's happening on the ground. The Fair Payment Code, introduced in December 2024, uses a tiered award system based on how quickly a company pays its suppliers.

However, this code is voluntary, and large companies can sign up without real consequences for paying late. Penalties linked to a percentage of turnover are planned, but they're not law yet.

The Late Payment Act of 1998 lets businesses charge statutory interest at 8% above the Bank of England base rate on overdue invoices, plus fixed compensation of £40 to £100 per invoice. Most small businesses don't use it, but referencing it in their payment terms can speed things up.