Little more than half of all invoices sent by Scottish freelancers and small businesses were paid on time during the past 18 months, with evidence indicating that the situation has deteriorated further amid the coronavirus pandemic. 

An analysis by cloud accounting software company FreeAgent of more than two million invoices sent throughout the UK between January 2019 and June 2020 found that just 54 per cent were paid on time. The situation was marginally worse in Scotland, where that number fell to 52%. 

Looking specifically at the period of lockdown from April to June, the number of invoices paid to the UK’s small firms and freelancers plunged by a third against previous quarters. There was also a slight increase in late payments during this period, with just 51% of invoices settled on time. 

Ed Molyneux, chief executive and co-founder of Edinburgh-based FreeAgent, said the results highlight just how badly affected the sector has been by the pandemic, and why the long-standing issue of late payments needs to be addressed as an equal priority to wider Covid-19 support. 

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“With the UK economy reeling from the Covid-19 pandemic and many businesses looking nervously ahead at a potential no-deal end to the Brexit transition period, it’s easy to overlook the other challenges facing our small business sector,” he said. 

“However, it’s vital that we do not brush the issue of late payments to one side. Failure to be paid on time remains one of the most widespread and devastating problems for freelancers and small businesses, and very little has been done so far to address the issue.” 

All three of Scotland’s largest cities ranked among those in the UK with a higher-than-average percentage of late payments. Half of all invoices sent by freelancers and SMEs in Edinburgh were not paid on time, followed by 49% of those in Aberdeen and Glasgow. 

Across the UK, Liverpool, Sheffield and east-central London were the three worst areas for late payments at 66%, 63% and 62% respectively. Those least affected by late payments were Ipswich (7%), Manchester (10%) and Yorkshire (25%). 

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Separate research conducted by FreeAgent suggests the small business sector is becoming increasingly frustrated by the lack of Government response to the late payment issue. In a survey of more than 1,200 SME owners, just 6% said they thought elected officials were taking the issue seriously, while 22% were in favour of new legislation and harsher penalties to specifically target late payers. 

“Small business owners don’t have the luxury of being able to absorb late payments into their accounts – they need to get paid promptly to keep their cash flow healthy,” Mr Molyneux said. 

“In our current volatile economic climate it is more important than ever for these people to be protected and supported, which is why we urge the Government to introduce new legislation and significant penalties to help tackle the scourge of late payment once and for all.” 

Originally set up in 2007, FreeAgent is part of the NatWest Group following its £53 million acquisition by the Royal Bank of Scotland in 2018.