2015 saw a record number of start-ups in Britain but the plague of late payments shouldn’t be forgotten

2015 saw a record number of start-ups in Britain, 608,110 companies were registered with Companies House, an increase from the 2014 figure of 581,173. The figures for 2016 are on course to beat this even more with over 145,000 business start-ups by mid-march already(1). This isn’t surprising as a report in 2015 revealed UK had jumped up two places to become the 6th best place in the world to do business in.

The figures look positive and show people’s increased appetite for entrepreneurship reflecting their confidence in the economy. One in four UK adults want to start a business in 2016, according to a survey, rising to 70 per cent among those aged 25-34 as more people aspire to gain the flexibility and fulfilment that they can’t get from their day jobs.  With 44 per cent of small business owners having secured development finance in 2015, this indicates start-up finance is now more readily available. Investors are also far more willing to invest with more than £3.6bn invested into UK tech start-ups in 2015 alone(2).

Late payments

Although there’s a lot of positivity, it must also be remembered that not all these businesses will succeed to stay in business due to different reasons. It could be due to external factors such as the economy, new regulations or internally with cash flow and operations. Research shows more than half of new businesses don’t survive beyond five years and these rates are even higher than before the financial crisis (3).

Ultimately the biggest killer of small businesses is running out of money.  British businesses continue to be plagued by late payments with nearly two thirds (60 per cent) having to wait for 60 days or more for payment (4). It shows the continuing failure in Britain for suppliers to pay on time despite it having been a problem for many years. The direct impact of late payments includes major cash flow difficulties for one in ten firms (12 per cent) and being unable to pay their own suppliers (12 per cent). A small number of businesses reported even more serious situations, with some paying wages late to staff (3 per cent), being unable to pay their overheads (2 per cent), or having their own credit rating downgraded.

Unless the government cracks down on this with policies and laws to make sure small businesses don’t get pushed into a corner, it‘ll continue to be a problem. However, you can pro-actively take action and measures to protect your business and minimise the financial risk it’s exposed to. At Experian Business Express, we’ve especially created a package for start-ups under two years old to help them make smarter credit decisions in an affordable way.  Our 99 business credit reports for £99 is a starter package to help you see the benefits of credit checking. Find out whether your customers and suppliers can pay you on time, what their financial status is, along with automatic notifications when their financial circumstances change. At the same time, businesses will receive £20 marketing credit to access our database of 5.1 million records to find new customers.

Click here to find out more and try for yourself today.

Sources: 1 startupbritain; 2 startups; 3 Telegraph; 4 Talkbusiness