UK SMEs are burdened with an average trade debt of £1.3m, putting the most vulnerable at serious risk, according to research from online debt recovery law firm Debt Guard Solicitors.
The research, based on account details submitted to Companies House by over 9,100 SMEs, found that the total UK SME debt burden during the last financial 2013/14 reached £6.3tn.
Micro-SMEs with 1-9 staff and a turnover of less than £2m were proportionately the hardest hit, with each contending with £68,000 worth of trade debt and 12% in “severe debt trouble”.
A key research finding, according to Debt Guard, was that 12% of UK micro-businesses had dangerously high trade debt levels that reached one third of annual turnover.
In contrast, just 5% of larger SMEs were in a similar risky financial situation. Of all these high risk firms, 44% are located in London.
Mark Burgess, chief operating officer at Debt Guard Solicitors, said: “This research highlights there is a highly varied national trade debt picture emerging within the SME marketplace, created by unpaid and outstanding invoices. In the past, SMEs have often been lumped together when it comes to debt management, but it is clear that micro-SMEs in particular need much greater support in this respect.
“As the backbone of the UK economy, many of these micro-firms are suffering from big trade debt issues with the threat of closure a real danger. Our message to all SMEs in this position is, ‘don’t write off your debt’, look at legal ways to professionally recover it as, by improving credit flow, this will help put your business on a more stable financial footing.”