Andrew McRae

FSB’s Small Business Index (SBI) for Q2 2024 found more than three-fifths of Scottish small businesses (62.5%) experienced issues with late payments, significantly more than in the previous quarter (57%), while nearly a third of firms (32.29%) reported the problem was getting worse.

The rise in late payments came as confidence among small businesses slipped into negative territory, with the SBI in Scotland falling by 17.7 points to -7. This followed the first positive reading for a year in the first quarter of 2024.

Andrew McRae, FSB Scotland’s policy chair, said: “Late payment has been a scourge on thousands of small businesses for far too long. The latest SBI results show it is a problem which, without decisive action, is spiralling out of control.

“All small firms are asking for is fair treatment from bigger companies. And where that doesn’t happen, the government needs to step in to ensure an even playing field.

“Government at every level needs to be doing all it can right now to reinvigorate economic growth. But you won’t get growth if money’s not moving round the economy and late payments are crippling businesses’ cashflow.

“Boards of large companies can be made more accountable for their payment practices. And, specifically in Scotland, while the procurement reform programme emphasises the need for prompt payment in the supply chain for public sector contracts, it’s clear that message needs to be bolder and firmer in order that we can address the problem highlighted by our figures.”

FSB has been campaigning for effective measures to hold big businesses to account over late payment and create a level playing field for small firms. Its General Election Manifesto outlined concrete steps which the UK government can take to tackle the issue, including forcing large corporations to publish details of their late payment record and barring poor payers from public procurement contracts.

Last year, the FSB Time is Money: The Case for Late Payment Reform report showed the problem stifles economic activity and is a critical factor in whether startups survive and succeed.

The downturn in the SBI north of the border reflects the UK-wide trend where the result was down from 5.5 the previous quarter to -10.8 in Q2.

The proportion of Scottish small businesses reporting revenue growth in Q2 was the same, at 34.8%, as the share reporting revenue decline. This net balance of zero marks the first non-negative reading in a year and was significantly higher than the -9.3% recorded for the UK as a whole.

Looking ahead, a net balance of 13.4% of Scottish small businesses expect revenues to grow in Q3.