Britain’s small firms are growing on paper — but running out of cash

Britain’s small businesses may be reporting rising revenues, but behind the headline growth figures a cashflow crisis is gathering pace. New data shows almost half of all invoices are now paid late, with average payment times stretching to 37 days. Business owners warn that while sales are holding up, delayed payments, falling spending and mounting uncertainty are leaving many firms fighting for survival, with hospitality businesses among the hardest hit.

The fading pulse of the UK’s small businesses

Sage, the accounting software company, will publish its latest full ‘SME pulse’ report on small business performance on the 15th June 2026. In its sneak preview, out yesterday, there’s good news and bad news. Sage data shows:

• small business revenues grew 3.2% in real terms

• small business employment is up 0.4% while pay growth is easing, suggesting a gradual cooling of the labour market.

• Finance and Insurance stand out as the strongest performer with revenue growth of 15.9% and positive employment growth of 2%.

Where challenges remain

• Spending slowed sharply from 4.8% to 1.6%. This suggests firms are pulling back on costs as uncertainty rises in the face of global pressures such as the conflict in Iran.

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There’s continued pressure on cashflow as nearly half of invoices (49.2%) are now overdue, with average payment times rising to 37 days.

• Accommodation and Food was the weakest performer, with revenue growth of just 0.9% and a 1.4% drop in headcount, the sharpest of any sector.

The bit that’s flashing red is that half of all invoices are now late and average payment days are up. This data highlights the importance of the Government’s focus on tackling late payments. The Bill aimed at tackling the problem will have its second reading in the House of Lords on 9th June.

If nearly half of invoice are now being paid late the shows the UK economy is weaker than it looks. Businesses hold onto cash when they are concerned that they might need it. Confident businesses pay up.

Photo by Chanhee Lee on Unsplash

The Sage data paints a picture of an economy growing on paper but gasping for cash in real life, with small firms being forced to wait 37 days on average to get paid. That’s not new but things had been improving with average days down to around 30 days a year ago.

While some sectors are booming, others are on their knees leaving the UK’s crucial small businesses dangerously exposed.

THE GOOD NEWS: SOME PARTS OF THE ECONOMY ARE GROWING

Small businesses are managing to grow — just.

• Revenues rose 3.2% in real terms, matching the UK’s GDP performance.

• Employment nudged up 0.4%, showing firms are still hiring.

• Pay growth is cooling, easing pressure on wage bills.

• Finance and Insurance are smashing it with 15.9% revenue growth and 2% more staff.

There is life in the economy.

But scratch the surface and the cracks are widening.

THE BAD NEWS: SPENDING HAS FALLEN OFF A CLIFF

Small business spending has collapsed from 4.8% growth to just 1.6%. Firms are slamming the brakes as uncertainty rises from the conflict in Iran and our own ongoing political upheaval leads to shaky confidence at home. When businesses stop spending, it’s not belt‑tightening. It’s self-preservation.

49.2% OF INVOICES NOW OVERDUE

This is the sort of statistic that led to the introduction of the Bill to tackle poor payment practices at the end of May 2026. That’s not a blip but a long-time system failure.

Late payments are draining billions from small firms, strangling cashflow, and forcing owners to:

• delay hiring

• cut investment

• freeze spending

• take on debt that costs them and reduces their margins

• or shut down altogether

The Government says it’s cracking down on late payments and long payment terms in contracts, but small firms say the crisis is getting worse, not better.

Taking a Bill through parliament takes a long time; there’s nothing to say it will go through as it ahs been drafted; there will be lobbying by bigger firms that don’t like the idea of having a 60 day maximum payment term written into contracts; there will be lobbying for further exemptions from the measures proposed; and when the Act is passed there will be time added for implementation. In the meantime, the hit to cashflow in here and how and not being able to manage your cashflow is the main cause of business failure.

HOSPITALITY IS IN FREEFALL

The worst‑hit sector? Accommodation and Food, where:

• Revenue grew just 0.9%

• Headcount fell 1.4% — the sharpest drop of any industry

Pubs, cafés, restaurants and hotels are being hammered by:

• rising costs

• falling consumer spending

• staff shortages

• and customers paying late

This is the sector that employs millions of young people. If it collapses, the starter jobs for young people go with it.

WHAT THIS REALLY SAYS ABOUT THE UK ECONOMY

The headline numbers look fine. The reality is much starker.

• Businesses are growing but not getting paid.

• Jobs are holding up but spending is collapsing.

• Some sectors are booming but others are bleeding out.

• Cashflow is tightening which is the classic sign of a downturn.

This is what economists call a “fragile recovery”. Small businesses say they’re hanging on by their fingertips.

Britain’s small businesses are doing everything they can to keep the economy moving: hiring, selling, innovating, surviving.

But with half their invoices unpaid, spending falling, and key sectors struggling, the warning lights are flashing bright red.

If late payments aren’t tackled fast, the UK could slide from a fragile recovery into a full‑blown crisis. When small businesses can’t get paid… Britain stops. And when bigger businesses aren’t paying them the question to ask is: are they too in financial difficulty?