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Small and medium-sized enterprises are increasingly seeking protection against unpaid invoices as trading conditions remain challenging, according to Bibby Financial Services.
The lender’s latest SME Confidence Tracker reveals that the average amount owed to SMEs in unpaid invoices has risen to £66,770 – a 10% increase year-on-year. Meanwhile, 30% of SMEs reported writing off an average of nearly £30,000 due to customer insolvency or default.
In response, demand for Bad Debt Protection (BDP) is surging. In 2025, 60% of Bibby Financial Services’ new business prospects opted to include BDP as part of their funding package.
Importantly, businesses are increasingly protecting their entire sales ledger rather than selectively covering individual customers, highlighting a shift toward recognising broader payment risks across supply chains rather than isolated problem accounts.
Derek Ryan, CEO for North West Europe at Bibby Financial Services, said: “Economic pressures are driving caution among many businesses who are urgently seeking ways to protect against insolvency and protracted default of customers, so we have seen a significant increase in funding applications that include bad debt protection. For many, it’s no longer about simply protecting against one or two problematic debtors, and we are seeing more SMEs covering their entire sales ledger, which indicates the extent of supply chain pressures today.”
Figures reflect the growing financial pressures facing SMEs across the UK, with some being forced to fold. UK Government statistics for February 2026 show corporate insolvencies for the month hitting 1,878 – a 7% rise from January 2026. However, bad debt is no longer confined to businesses on the brink of insolvency.
BFS’s research shows that payment delays have lengthened considerably with 62 percent of SMEs saying their customers are taking longer to pay in full compared with a year ago. Further, almost one in five businesses (19%) say they have delayed paying creditors to preserve their own cashflow.
Derek Ryan, added: “This is a clear reflection of the uncertainty many firms are currently facing because of lingering high costs and trading volatility. However, unlike late payment, which is a widely accepted issue – though we’re pleased to see the Government is now taking action on this – bad debt is the hidden cost-of-doing-business. It’s a widespread problem which has significant knock-on effects on costs across supply chains, as those writing-off sums owed increase margins to cover their own losses.
“There’s also a strong indication that, in certain cases, organisations are adopting deliberate payment delay tactics to protect their own financial positions. This is a worrying development that should ring alarm bells for businesses of all sizes, as well as for policymakers seeking to safeguard the resilience of supply chains across the UK economy.”
Theo Noyek, Director at Theo’s Timber said: “We’re seeing the impact of the conflict in the Middle East play out very clearly on global supply chains. Much of our materials supply comes from China and the Far East through the Strait of Hormuz. But shipping diversions there have pushed up typical delivery times from 12 to 16 weeks, and every delay racks up costs and prices. This is having a significant knock-on impact for our customers, including driving up insolvencies which seem stubbornly high and reminiscent of 2008.
“Thankfully for us, we incorporated bad debt protection from BFS into our financial planning strategy from day one, so we’re better able to manage the current situation and protect our margins and cashflow. It also provides us with an added layer of confidence when we take on new customers.”
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