The proportion of small businesses suffering from non-payment has also escalated. Credit: NaMong Productions92 / Shutterstock.

SME funder Bibby Financial Services (BFS) has released its latest findings, showing a 127% jump in the value of bad debt among small businesses over the past six months.

According to BFS’ SME Confidence Tracker report, the surge has put considerable pressure on SME supply chains, with businesses writing off an average of nearly £40,000 ($51,823) in unpaid invoices in the last year, a substantial rise from the previous average of £17,500.

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The proportion of small businesses suffering from non-payment has also escalated, reaching 40%, up from 30% in March.

These figures emerge as the UK Government prepares to introduce the Fair Payment Code, aiming to alleviate the supply chain pressure caused by late or non-payment by customers.

Bibby Financial Services CEO Jonathan Andrew said: “This is a supply chain disaster waiting to happen for SMEs, as well as a huge economic leakage. While late payment is a known challenge, bad debt, where unpaid invoices are written off entirely, is a hidden assassin that can wreak havoc through SME supply chains.”

Late payments have been a persistent issue for small businesses, with data from the Federation of Small Businesses indicating that such delays lead to the closure of 50,000 businesses a year.

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Although there was a 9% decrease in corporate insolvencies between July and August 2024, the numbers remain above pre-pandemic levels.

This trend is mirrored in the data from Bibby Financial Services, which shows that more than half of SMEs have witnessed the collapse of at least one supplier (58%) and a similar proportion have seen the insolvency of at least one customer (56%).

Andrew added: “Measures announced by the Government such as the Fair Payment Code are welcome, but the reality is that it’s not only larger businesses that pay late. Many small businesses do so through necessity or to preserve cash flow to make critical payments, so we really need to be looking at how to inject working capital into supply chains sooner to insulate smaller businesses, as well as reduce payment times.

“It’s also critical that the government measures draw the distinction between late payment and the lesser understood issue of bad debt due to non-payment or protracted default. This can so often be devastating – not only to the creditor but to those businesses within their supply chains.”