Late pay-demic: average tradesperson currently chasing £7,000 in late payments

• Over half (57 per cent) of late payment claims have been unsuccessful or unresolved
• The largest single invoice tradespeople have written off averages close to £5,000
• Almost a quarter (23 per cent) of tradespeople worry about personal expenses due to late payments, along with their mental health (21 per cent) and bankruptcy (18 per cent)

New research¹ from Direct Line business insurance reveals tradespeople are currently owed on average £6,984 which is past the due date for payment.

Late payments are a longstanding issue and many tradespeople have had to write off significant sums. On average, the largest single invoice they have given up chasing on payment comes to £4,757 with nearly a quarter (24 per cent) losing out on payments worth over £2,500. More than three quarters (78 per cent) have at some point tried to make a legal claim to recover payments. Over half (57 per cent) were either unsuccessful in their claim or still have unresolved claims.

At a time when expenses are rising sharply due to inflationary pressures, late payments are significantly impacting tradespeople’s personal lives, business operations, and mental wellbeing. Almost a quarter (23 per cent) worry about not being able to cover their family or personal expenses and one-in-five (21 per cent) are concerned about how late payments are impacting their mental health.

Nearly one-in-five (19 per cent) worry about the cost of getting legal advice for chasing down late payments, with 20 per cent worrying that the time spent chasing invoices prevents them from getting on with their primary job. Late payments can also threaten the survival of a business and its owner’s ability to pay salaries. Almost one-fifth (18 per cent) of tradespeople say that late payments could lead to them filing for bankruptcy, with 17 per cent saying that late payments would impact their ability to pay themselves or their staff on time.

Research from The Institute of Chartered Accountants in England and Wales (ICAEW) revealed that late payments cost small business owners £684m² each year. The current economic environment may be making the situation worse, with half (51 per cent) of tradespeople stating the ongoing cost-of-living crisis has impacted the number of late payments they are receiving.

To reduce the impact of late payments on their business, many tradespeople are changing the way they bill for their work. Over a quarter (27 per cent) refuse to start work until they receive up-front payment in full, with a quarter (25 per cent) choosing to take payments immediately with a card reader or mobile payment. Nearly a quarter (24 per cent) charge a ‘late payment fee’ to their clients, and the same number of tradespeople take half of the payment in advance and then the remainder once work is complete. A fifth (20 per cent) of tradespeople offer discounts to clients for paying quickly.

Alison Traboulsi, Product Manager at Direct Line business insurance commented:

“Tradespeople are vital to the UK economy, and it’s worrying to see that so many are struggling to get paid on-time. Their time is hugely valuable, so effort spent chasing monies owed could prevent them from taking on more work or completing jobs on time. Late payments can also have a huge impact on business operations, finances and, at times, tradespeople’s mental health.

"Times are tough and it is difficult to see so many tradespeople miss out on payments they are legitimately owed due to concerns around legal costs, amongst other reasons. Direct Line business insurance policies come with Legal Essentials, a service that provides tradespeople with unlimited access to a team of DAS legal experts for confidential legal advice and access to a library of legal templates, tools, and guides to help them run their business, including guidance on how to pursue late payments.

“A 24/7 helpline is available to provide advice on the laws of England and Wales. Advice involving other jurisdictions will be referred to specialist advisors, who are available 9am-5pm, Monday-Friday, excluding bank holidays. The service also provides policyholders with access to a Stress Counselling Helpline, which is available 24 hours a day, seven days a week, all year round.”

For more information on Legal Essentials please visit: https://www.directlineforbusiness.co.uk/small-business-insurance/legal-essentials

Further information about Direct Line business insurance's Tradesperson cover can be found here: https://www.directlineforbusiness.co.uk/small-business-insurance/tradesman

-ENDS-

(1) Opinium survey of 2000 UK adults, including 161 tradespeople who either own a business or are self-employed, conducted 10^th-14^th February 2023.

(2) ICAEW: The impact of late payments on small businesses (10 October 2022).

Direct Line Group

Unni Henry 

PR Manager

Email: unni.henry@directlinegroup.co.uk

About Direct Line business insurance

Launched in 2007 Direct Line business insurance now has over half a million customer policies, providing a flexible range of insurance products for the landlord, van and small business sectors.

Direct Line business insurance policies are underwritten by U K Insurance Limited, Registered office: The Wharf, Neville Street, Leeds LS1 4AZ. Registered in England and Wales No 1179980. U K Insurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Direct Line business insurance and U K Insurance limited are both part of Direct Line Insurance Group plc.

Customers can find out more about Direct Line business insurance products or get a quote by calling 0345 301 4827 or visiting https://www.directlineforbusiness.co.uk