Government-commissioned research published in July 2025 estimates that late payment costs UK businesses almost £7 billion a year, with about £26 billion owed late at any one time. A business that's being paid late is owed £17,085 on average and spends 86 hours a year chasing it. The figures come from a survey of 1,455 businesses in early 2025, so treat them as well-founded estimates and check them against your own ledger.
In this article
The short version
- Research for the Department for Business and Trade puts the direct cost of late payment at almost £7 billion a year, with £11 billion the wider economic figure.
- About £26 billion is owed late at any one time, an average of £17,085 per affected business, which would carry about £2,007 of statutory interest over a year.
- Businesses that chase spend 86 hours a year on it, valued at £1,455 in the research and £3,870 at £45 an hour.
- An estimated 28% of UK businesses are paid late in a year, and the 14,000 closures figure is modelled from the survey, not counted from records.
- Only 5.9% of businesses introduced or increased a late payment penalty, although every business invoice already carries a legal right to interest and compensation.
What late payment costs a business in money
Almost £7 billion a year is the estimated direct cost to UK businesses: the cost of borrowing to cover the gap, the staff time spent chasing, and debts that never get paid. It comes from research by London Economics for the Department for Business and Trade and the Small Business Commissioner. You'll also see almost £11 billion quoted. That's the knock-on cost to the whole economy, so the £7 billion is the better figure for what it costs businesses themselves.
The £26 billion is different again. It's the amount owed late at any one moment, and it works out at £17,085 for each business affected. That's an average across sole traders and 200-person firms alike, but it's a useful yardstick. If your overdue balance is in that range, it's money you'd otherwise have in the bank, or aren't paying overdraft interest on.
The law already puts a price on that delay. On a late business invoice you can charge interest at 8% above the Bank of England base rate, which is 11.75% a year with the base rate at 3.75%, plus fixed compensation of £40, £70 or £100 per invoice depending on its size. A £17,085 balance left late for a year would carry about £2,007 in interest before any compensation. If you don't charge it, the customer keeps that money.
How much time goes on chasing
Businesses that chase late payments spend an average of 86 hours a year doing it, and 22% of all businesses spend staff time this way. Across the economy that's about 133 million hours.
The research values that time at £16.92 an hour, which puts 86 hours at £1,455 a year. If the chasing is done by an owner, an office manager or a bookkeeper, your hourly cost is almost certainly higher. At £45 an hour, the same 86 hours is £3,870. That's more than two working weeks a year spent writing reminder emails and making calls that mostly repeat themselves.
How many businesses it affects
The same research estimates that 28% of UK businesses, over 1.5 million, are paid late in a year. You may also see 52% from the Federation of Small Businesses. That was small businesses reporting on 2022, while the government figure is scaled up to every UK business, including many that take payment on the spot and can't be paid late at all. The two measure different groups, so they don't show late payment halving. If you invoice on credit terms, your odds of being paid late are higher than 28% suggests.
The most quoted figure is over 14,000 business closures a year, or 38 a day, caused by late payment. It's modelled from the survey, not counted from insolvency records, since official closure statistics don't record why a business shut. It still makes the point that a few large late invoices can sink a firm that's otherwise trading well.
Construction reported the highest share describing late payment as a big problem, at 10.1%. If you install on building projects, that's the sector you're closest to.
What to do with these numbers
The national figures show the problem is common, but only your own ledger shows what it's costing you. Three numbers are worth pulling this month: your total overdue balance, the average days late, and roughly how many hours someone spent chasing last quarter.
Then look at whether you charge what you're owed. Only 5.9% of businesses in the research introduced or increased a late payment penalty, even though every business-to-business invoice already carries a legal right to interest and compensation. Charging it consistently changes how customers prioritise you, because paying you late stops being free.
Changes to the law are coming, but slowly. The Commercial Payments Bill would cap payment terms at 60 days and stop contracts replacing statutory interest with a lower rate, but it's still in Parliament and the government says the cap will start no earlier than 2027.
In the meantime, the chasing and the late fees are both jobs you can hand over. Adfin applies statutory interest and compensation to overdue invoices from the due date, with the payment link updating as the interest builds, and you can waive it for customers you want to keep on side. Its AI agents chase each overdue invoice over email, SMS or WhatsApp on the timing each customer responds to, within rules you set and approve, so nobody on your team has to write the reminders.
Common questions
How much does late payment cost UK businesses each year? Almost £7 billion a year in direct costs, according to research for the Department for Business and Trade published in July 2025. The cost to the wider economy is estimated at almost £11 billion.
How many UK businesses close because of late payment? The same research estimates over 14,000 a year, or 38 a day. It's a modelled estimate, as official closure figures don't record the cause.
How much are UK businesses owed in late payments? About £26 billion at any one time, or an average of £17,085 for each business affected.
How long do businesses spend chasing late payments? Businesses that chase spend an average of 86 hours a year on it, about 133 million hours across the economy.
What is the statutory late payment interest rate in 2026? 8% above the Bank of England base rate, which is 11.75% a year at the current 3.75% base rate, plus £40, £70 or £100 fixed compensation per invoice.
Are the 2026 late payment reforms in force? No. The Commercial Payments Bill is still in Parliament and isn't law, though large companies do now have to report payment data in their directors' reports for financial years starting on or after 1 January 2026.
Sources
- Department for Business and Trade - Late payments research: impact on the UK economy (accurate as of September 2026) https://www.gov.uk/government/publications/late-payments-research-impact-on-the-uk-economy
- Federation of Small Businesses - Time is Money: late payments stifle small businesses, report shows (accurate as of September 2026) https://www.fsb.org.uk/resources-page/time-is-money-late-payments-stifle-small-businesses-report-shows.html
- UK Parliament - Commercial Payments Bill [HL], Parliamentary Bills (accurate as of September 2026) https://bills.parliament.uk/bills/4128
- GOV.UK - Late commercial payments: charging interest on commercial debt (accurate as of September 2026) https://www.gov.uk/late-commercial-payments-interest-debt-recovery/charging-interest-commercial-debt
- Bank of England - The interest rate (Bank Rate) (accurate as of September 2026) https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate
