We rang in the New Year with news from the Office for National Statistics that productivity had risen for the first time in six years, which has been attributed to stalled employment and a tightened labour market producing extra GDP.
We also recently heard that UK manufacturing output is expanding at its fastest rate since early 2008, after seven consecutive months of growth last year. These two pieces of news, while obviously just a snapshot of the domestic economic climate, are still indicative of an economic picture that is starting to look a little less sluggish.
Our own figures from the latest Creditsafe Watchdog Report for Q4 (October – December) 2017, which tracks the economic developments across the 12 major UK business sectors, confirms that output is on the rise, with an increase in UK business sales of 32.90% filed over the last 12-months.
The report also shows an easing of new businesses launching, with 10,381 fewer start-ups in the last three months of the year. This easing of new businesses and industry expansion may also explain the increase in productivity and output. The Creditsafe Watchdog Report also monitors UK business bad debt figures on a quarterly basis, which stood at a record low at the end of 2017. Bad debt owed to the sectors dropped by £100 million between September and December and debt owed by the sectors dropped by £711 million in the same period. This is particularly welcome news following the previous quarter when debt owed by the sectors to suppliers rocketed by 95.4% to £962 million.
The culture of bad debt is directly linked to poor payment practices, which is an issue that has started to show signs of improvement. Our data shows that last year, 60% of UK businesses were paid within 30 days, which is the UK’s average payment terms. This accounts for an average of 69 million invoices across the 12 sectors we analyse that were paid on time, showing a promising start to 2018. There is a certain stigma attached to chasing late payment – it directly impacts business growth, particularly UK SMEs, and yet it is viewed as difficult and a challenge to fostering good, long-term client relationships.
Undeniably, however, respecting the rules of payment is part of maintaining profitability and productivity level, which UK GDP relies so heavily on. We know that 2018 is unlikely to be plain sailing, and there are a handful of health warnings attached to the positive financial trends we have seen in the last three months. That said, we are entering the year in better economic health than many would have predicted 12 months ago.