Small firms back Fair Payment Code despite late payments

Almost two-thirds (62%) of small businesses feel optimistic about the Fair Payment Code (FPC), despite being owed an average of £12,357.58 a year in late payments, according to new research from specialist insurer Hiscox.

The Fair Payment Code was launched in December 2024 with the aim of cracking down on late payments across UK supply chains. However, one year on, just 440 businesses have successfully met the criteria and received a Fair Payment Award, highlighting the challenge of driving widespread adoption.

The findings form part of Hiscox’s inaugural Late Payments Report, based on a survey of 1,000 small business owners and sole traders conducted via Censuswide. The research explores the scale and impact of late payments across the UK’s small business community.

Awareness of the Fair Payment Code remains low

While a majority of small business owners are optimistic about the FPC, one in eight (12%) feel pessimistic about its potential impact. Notably, one in 20 (5%) small business owners are unaware of the scheme entirely.

This lack of awareness is mirrored in online search behaviour. The term “Fair Payment Code” attracts around 500 searches per month, 40% fewer than the 700 monthly searches for its predecessor, the Prompt Payment Code.

Late payments could total more than £70bn across the UK

With an estimated 5.7 million small businesses operating in the UK, the total value of outstanding late payments could reach as much as £70.4 billion nationwide. The research shows that some sectors are disproportionately affected, with legal, healthcare and IT & telecoms businesses reporting the highest levels of unpaid invoices.

On average, legal firms are owed £15,641.79 each year, followed by healthcare (£15,467.89) and IT & telecoms (£14,671.76). Finance (£14,590.63) and manufacturing & utilities (£13,240.30) also exceed the small business average, underlining the widespread nature of the problem across professional and technical services.

How small businesses are tackling late payments

To manage and recover late payments, small business owners are deploying a range of tactics. Almost half (48%) send payment reminders, while 44% chase debtors directly by email or phone. Others withhold further goods or services (29%) or charge late payment fees (28%).

More robust measures are also being considered, with 14% willing to take legal action, 11% prepared to escalate cases to debt collection agencies, and 6% turning to social media to publicly call out late payers.

Richard Stone, Founder and Managing Director of PR agency Stone Junction, said consistent communication is key: “We’ve found that honest, consistent communication with clients is the single most effective strategy. Building strong relationships with both your main contact and the accounts team makes a real difference. Issuing invoices at the end of the month can also help avoid being pushed into the next payment cycle. Ultimately, getting paid on time isn’t just about process, it’s about people – be professional, be clear, and be proactive.”

“With some clear rules in place, businesses can keep their cash flowing and their focus where it belongs – on growing their business.”