British SMEs write off combined £5.8bn in debt

SMEs across Britain wrote off a collective £5.8bn in debt during the last financial year, according to new data.

The figure, which is equivalent to more than £21k every day, comes from new analysis provided by insurance firm Direct Line for Business.

When asked how much their company had written off in unpaid debts over the previous financial year, 19% of SMEs reported writing off debts at an average loss of £31,330.

Of these, 9% claimed to have written off debts in excess of £100k.

The SMEs were also asked why they had decided to write off the unpaid debts. Close to a third of respondents (29%) said it was because the supplier was unable to pay the monies owed due to insolvency.

Further, 17% said it was because they did not think the supplier would have sufficient funds to repay the debt.

Other reasons for writing off debt cited by respondents included lacking the funds to ‘chase’ the debtors through the courts (11%) and an unwillingness to damage a future relationship with the supplier/customer by demanding the debt owed (10%).

The head of Direct Line for Business, Nick Breton, 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, with reasons ranging from thinking that the client may not be able to afford the cost to damaging their relationship.”

He continued: “All of these debts add up and with nearly 7,000 companies estimated to have entered liquidation in the first half of 2016 alone, the potentially disastrous knock-on effects of writing off monies owed are clear.”