The Best — and Worst — UK Cities for Timely Contractor Payments

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There are many benefits of contracting over permanent  employment: the ability to work flexible hours, fresh and exciting challenges,  and higher pay rates, for example. However, there are a few areas where  contracting certainly has its own difficulties, and, as many contractors will  know, invoicing is one of them.

UK payment terms state that contractors must be paid for  their services within 30 days of invoicing. Of course, contractors can include  their own payment terms, giving their clients a little longer — perhaps 60  days. However, cloud services provider Freeagent claims that 50% of invoices are not paid on time.

Late payments tend to be prevalent in some cities more  than others. The Freeagent report shows that Manchester and York typically  contain the most prompt payers, with Sheffield struggling to keep up.

The Best Cities for Contractors

Here are the percentages of invoices paid within 3 days  of due date across different UK cities:

  • Manchester: 79%

  • York: 76%
  • Leeds: 72%
  • St Albans: 67%
  • Coventry: 61%
  • Nottingham: 60%
  • Peterborough: 30%
  • Sheffield: 29%

Payments may be slightly quicker if you’re providing services  to Government departments. Sadly, Peterborough is still down towards the bottom  of the list with a 38 day average, although Stirling Council gets a gold star  for being on time. 16 days is the average payment time for Government contracts.

Name and Shame

Recently, Government reports have started to ‘name and  shame’ some of the biggest offenders for late payments.  The good news is that the technology sector certainly does not appear to be the  worst! In fact, many technology and tech-related companies have been shown to  pay the majority of their invoices within the agreed payment terms. This  includes the likes of Cisco, Google, and Finastra, whose late payment  percentages all come in below the national average, which stands at 52%.

Impact on Contracting Landscape

It’s reported that the average UK contractor is owed £5431 in late payments, and that 46% of contractors  worry about money. However, more than half feel uncomfortable chasing clients  for overdue payments, which results in only 40% of unpaid contractors taking  out a County Court judgement each year.

This could potentially have a huge economic impact,  especially at a time when the Government is striving for a flexible labour  force to meet evolving demand. Businesses, and indeed the Government, are being  urged to do more to support and encourage this and the next generation of  skilled contractors.

New Trends

Late payments are changing the contractor landscape,  with new trends being introduced to address common contractor issues and  minimise risk. While still rare in the UK, some contractors are now beginning  to introduce new terms to their invoices, including a ‘prompt payment  discount’.

The  prompt payment discount is commonly used across many other European countries,  including Germany, Holland, France, and Italy. Typically, a 2% or 3% discount  is offered for businesses paying within 14 days. It is expected that  contractors may begin using similar methods to reduce risk in the future.

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