Overdue SME invoices are creating a ripple effect of late payments throughout the UK economy and limiting the ability of UK businesses to invest and grow.

With the Small Business Protections (Late Payments) Bill progressing through Parliament, a new study from Sage has demonstrated the scale of the issue, both for SMEs and the wider economy.

According to the report, close to half of all SME invoices (49 per cent) are overdue, while businesses spend an average of 27 days waiting to receive payment after issuing an invoice.

Sage states that this has led to a “ripple effect” across the UK economy, with SMEs themselves now taking longer to pay their own suppliers. In Q1 2025, UK SMEs took an average of 31.9 days to pay invoices, but this has since risen to an average of 37.1 days.

Overall, late payments are estimated to cost the UK economy around £11 billion each year and are severely limiting the ability of business to hire, invest and, ultimately, attain growth.

The Small Business Protections (Late Payments) Bill, also referred to as the Commercial Payments Bill, passed its second reading in Parliament earlier this month.

The bill imposes financial penalties on businesses that are persistently late in paying suppliers and is described by Sage as representing “a turning point in how cash flow is unlocked”.

As well as this bill, the government is set to introduce e-invoicing from 2029 in an effort to further crack down on late payments. Digital invoicing systems have been found to support more efficient payments, with e-invoices typically being paid between five and seven days sooner.

Emma Jones, Small Business Commissioner, said: "Sage’s data shows that more needs to be done to tackle late payments, with too many small businesses still waiting weeks to be paid.”

“That’s why action to improve payment practices is so important. It gives firms greater certainty over their cash flow and the confidence to invest, hire and grow. Tackling late payments isn’t just about fairness; it’s essential to unlocking the full potential of the UK’s small businesses."

Despite the problems caused by late payments, Sage’s report also showed that UK SMEs have achieved their strongest rate of profit growth since 2022, with profits rising by 7.4 per cent in the year to Q1 2026.

Derk Bleeker, Chief Commercial Officer at Sage, commented: “The UK’s small business community continues to demonstrate extraordinary resilience to adapt and grow.”

“The fact that profitability has reached its highest level in four years is a testament to the determination and ingenuity of business owners across the country. It also highlights the opportunity that exists to help SMEs build on this momentum and unlock even greater growth in the years ahead.”