Small firms 'forced to write off debts'

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Small firms 'forced to write off debts' (image credit: iStock/Gordon Bell)

New research has highlighted the considerable losses that are being taken by the UK's small to medium-sized enterprises (SMEs) as they are forced to write off thousands of pounds of outstanding debts every day.

Figures published by Direct Line for Business have shown how a combined £21,000 is being written off by the nation's SMEs each day, with a cumulative £5.8 billion lost by these businesses in the last financial year.

According to the insurer's research, 40 per cent of UK SMEs have written off debts in the last year, while 82 per cent of firms have outstanding debts they are currently in the process of chasing up with clients.

Some of the main reasons given for businesses currently facing a backlog of debts were: supplier/customer become insolvent with money owed (29 per cent), lack of time/resource to chase up outstanding balances (11 per cent) and not wanting to spoil existing relationships (ten per cent).

Nick Breton, head of Direct Line for Business, said: "With more than a million SMEs based across the UK, these enterprises really do make up the backbone of the British economy.

"However, it is alarming to see just how much hard work goes unrewarded, especially when considering that many SMEs appear reluctant to chase debts."

He added that the fact that approximately 7,000 companies have entered into liquidation in the first half of 2016 means that this is now in danger of becoming a vicious cycle of outstanding balances that can have a knock-on effect throughout the UK supply chain.