Manufacturing SMEs urge Budget action on late payments

Small and medium-sized manufacturers are calling on the Government to take stronger action against late payments, warning that mounting unpaid invoices and persistent cost pressures are stifling growth and delaying investment.

New data from Bibby Financial Services’ (BFS) SME Confidence Tracker shows that nearly six in ten (59%) manufacturing firms believe existing Government measures, including the Fair Payment Code, fail to adequately protect them. The sector was the most critical of Government efforts among all industries surveyed.

According to the research, manufacturing SMEs are owed an average of £76,000 in outstanding invoices. Sixty-one per cent say customers are taking longer to pay than they were a year ago, while more than a third (34%) report suffering bad debt because of non-payment or disputes – the highest rate across all sectors.

Derek Ryan, UK Managing Director at BFS, said manufacturing SMEs face sustained pressures despite some signs of market improvement.

“SME manufacturing firms are under pressure from late payment and bad debt, which combined put a significant strain on cashflow,” he said. “Despite a glimmer of optimism in recent months, market conditions remain tough, with producer input and output prices rising annually.”

While easing inflation has renewed expectations of an interest rate cut in December, high operating costs remain a dominant concern. Nearly two-thirds (64%) of manufacturing SMEs cite rising costs as a major challenge — a higher proportion than construction, services or transport.

The forthcoming Budget is now shaping investment decisions across the sector. Almost half of manufacturers (49%) say they are postponing investment until after the Chancellor sets out her plans, highlighting the need for greater policy clarity.

Manufacturing SME leaders identified reduced business rates or corporation tax (23%) and access to low-interest loans or grants for expansion and job creation (23%) as the most pressing measures the Government should introduce.

Ryan said the Budget represents a crucial moment for the industry. “The Chancellor must act decisively in her Budget to unlock, not hinder, growth for the manufacturing sector,” he said. “More broadly, the Government still must deliver on the investment intentions it laid out in its Industrial Strategy to give the manufacturing sector a fighting chance of being able to grow and thrive in 2026 and beyond.”