UK manufacturing SMEs are urging Ministers to confront late payment practices in the run-up to next month’s Budget, warning that chronic delays in settling invoices are constraining cashflow and stalling investment across the sector.
New research from Bibby Financial Services shows that almost six in ten manufacturing SMEs believe existing measures, including the Fair Payment Code, fall short of offering meaningful protection. Manufacturers were the most critical of government efforts on late payment among all sectors surveyed.
According to the latest BFS SME Confidence Tracker, firms in the sector are owed an average of £76,000 in outstanding invoices, while 61% say customers are taking longer to pay than a year ago. More than a third of manufacturers (34%) reported losses due to bad debt arising from non-payment or lengthy disputes, compared with a cross-industry average of 29%.
Derek Ryan, UK Managing Director at BFS, said manufacturing SMEs were being squeezed by the twin pressures of overdue invoices and rising costs. “Despite a glimmer of optimism in recent months, market conditions remain tough, with producer input and output prices rising annually,” he said.
Although easing inflation has prompted expectations of an interest rate cut in December, high costs continue to weigh on sentiment. Nearly two-thirds (64%) of manufacturing SMEs cited elevated costs as a significant challenge — the highest proportion of any sector, outpacing construction, services, and transport.
The data also show mounting caution ahead of the Chancellor’s Budget, with manufacturers calling for targeted intervention. Among their priorities are reductions in business rates or corporation tax (23%), and a focus on low-interest loans or grants to support expansion and job creation (23%). Nearly half of respondents (49%) said they were postponing investment decisions until after the Budget, underscoring the demand for clearer policy direction.
Ryan said the Government must provide firmer assurances to industry. “The Chancellor must act decisively in her Budget to unlock, not hinder, growth for the manufacturing sector,” he said. He added that Ministers must also follow through on commitments set out in the Industrial Strategy “to give the manufacturing sector a fighting chance of being able to grow and thrive in 2026 and beyond.”
