Payment performance slides in Q4 2010

Payment performance slides in Q4 2010

Bad weather impacts payment times within the UK’s small business sector

Nottingham, 3 February 2011 — The Late Payment Index from Experian®, the global information services company, reveals that a significant decline in payment performance occurred among UK businesses of all sizes towards the end of 2010 as the bad weather took its toll. 

Experian’s analysis shows that while the average payment performance for 2010 as a whole saw a small improvement from 22.81 days in 2009 to 22.58 days, payment performance deteriorated during the final quarter of 2010, with firms paying their bills 25.70 days late - the highest recorded average since Q3 2007[1].

Businesses with 500+ employees remain the ones taking the longest to pay their bills, but the biggest decline in performance during Q4 2010 occurred within the small to medium enterprise (SME) sector.  In particular, firms with 100 employees or less paid their bills an average of 22.24 days late in Q4 2010, three and a half days slower than during the equivalent period in 2009. 

Jason Mills, Head of Payment Performance at Experian UK & Ireland, said: “Although overall payment performance improved slightly during 2010, the final few months of the year have highlighted that businesses still need to be cautious.  The bad weather played a key role in this downward trend with many firms closing as employees struggled to get into their offices. A late payment from one small business can easily lead to a cashflow problem in another, particularly when their corporate relatives take even longer to pay. 

“It is important that companies take more time to assess the credit ratings and payment performance of prospective customers and suppliers before doing business with them to ensure they are completely aware of any likely impact on their own business.”

Other insights from Experian’s analysis include:

• In Q4 2010, although large enterprises (500+ employees) continued to be the slowest payers, on average taking more than five weeks (36.74 days) to pay bills, they saw the smallest increase in late payment compared to businesses of all other sizes.
• Over the course of 2010, businesses with over 500 employees have seen the biggest improvement in their payment performance – from an average of 38.96 in 2009 to an average of 35.74 in 2010.
• Below 100-employees, the two best performing groups during Q4 2010 were 1-2 employees (20.47 days) and 11-25 employees (21.89)

Source: Experian

North West heads the late list

Late payments differ greatly from region to region; in the South West, for example, companies typically pay their bills ten days earlier than London-based firms.  Yet it is the North West that saw the highest average late payment times during Q4 2010, at 29.43 days.

Compared to Q4 2009, Scotland recorded the biggest increase in late payments, its average rising almost six days to reach 28.08 days.  It was also the worst hit by the severe weather at the end of 2010.  Northern Ireland and the South West are currently the only two areas of the UK where average late payment is less than 20 days – this compares to a year ago when half of government regions registered 20 days or less.

Regional performance varies according to size of business.  For firms of 100 employees or less, the West Midlands performed worst, with these SMEs taking 25.04 days to pay their bills.  Other regions where late payment problems were particularly pronounced for small businesses included the North East (26.09 days for firms of 51-100 employees, 26.65 days for firms of 11-25) and Yorkshire (25.38 days for firms of 3-5 employees).

Source: Experian

Industry trends

Businesses within the postal and telecommunications sector continue to be the slowest to pay their bills, at an average of 47.19 days during Q4 2010 – nearly twice the average time recorded.  The property sector and leisure & hotels sector also struggled, with payment times averaging well over thirty days in both cases.

Honing in on the SME sector it is possible to see the major inconsistencies that exist from firm to firm within specific industries.  For example, utilities businesses with between 26-50 employees paid bills 15.08 days late on average, yet in the same industry firms between 51-100 employees took over twice as long (39.20 days).  Similarly, in leisure and hotels, firms with 50 employees or less took 30.02 days on average to pay bills, yet for slightly larger firms (51-100 employees) this figure shrank to just 20.05 days.

Source: Experian

ENDS

For more information, visit http://www.experianplc.com.

Contact:

Ms Serj Heera 

PR Manager

0115 992 2773/07837 652169

serjeet.heera@uk.experian.com

Helen Carnall, Tom Kirkham or Gill Corish

Blue Rubicon

020 7260 2700

ExperianSME@bluerubicon.com

About Experian
Experian is the leading global information services company, providing data and analytical tools to clients in more than 90 countries. The company helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score, and protect against identity theft.

Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended 31 March 2010 was $3.9 billion. Experian employs approximately 15,000 people in 40 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; Costa Mesa, California; and São Paulo, Brazil. 

For more information, visit http://www.experianplc.com.

 [1] Data collated for Experian’s Late Payment Index commences in Q3 2007.