UK businesses are increasingly focused on preserving cash flow as payment delays worsen and companies extend payment terms amid mounting economic pressures, according to research from Coface.

The research found that 89% of UK companies experienced payment delays over the past year. Payments were an average of 34 days overdue, two days longer than a year earlier, with financial difficulties cited as the leading cause by 37% of respondents.

No sector recorded a net improvement in payment behaviour, with the sharpest deteriorations in paper and wood, metals and automotive and transport. Coface linked these pressures to increased Chinese competition, higher US tariffs and supply chain disruption associated with the conflict involving Iran.

Average payment terms have risen to 57 days, six days longer than in previous years and among the longest reported in Europe. One-third of large companies offer terms exceeding 90 days, compared with 12% of micro and small businesses.

“Longer payment terms are tightening the squeeze on SMEs. While large organisations can absorb delayed payments, many smaller businesses are already operating on a knife edge, carefully managing cash flow just to stay afloat. With economic conditions set to worsen, every extra day waiting to be paid limits their ability to grow and withstand further shocks,” Benoit Urbin, country manager for the United Kingdom and Ireland

The outlook is weakening, with 57% of businesses expecting late payments to increase over the next 12 months, up from 37% previously. Meanwhile, 45% expect the UK economy to deteriorate, compared with 25% anticipating an improvement.

Despite this, 51% expect profits to increase, although Coface said this optimism partly reflects cost control and extended payment terms, leaving margins finely balanced.

AI is adding pressure across supply chains, with 80% of companies using AI reporting changes in their use of external providers. Most, however, reported increased reliance on third-party expertise.

Higher interest rates remain the biggest concern, with elevated borrowing costs threatening profitability and investment.

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