Manufacturing SMEs have urged the government to strengthen protections against late payment after new research from Bibby Financial Services suggested existing measures are failing to support the sector.

The funder’s latest SME Confidence Tracker found nearly six in ten manufacturers believe current initiatives, including the Fair Payment Code, fall short.

The findings underline a worsening picture for many smaller firms. Manufacturing SMEs are owed an average of £76,000 in unpaid invoices, while 61% report customers are taking longer to settle bills than a year ago. The sector has also experienced higher levels of bad debt than any other industry surveyed, with 34% encountering losses through non-payment or prolonged disputes.

Derek Ryan, UK managing director at Bibby Financial Services, said: “SME manufacturing firms are under pressure from late payment and bad debt, which combined put a significant strain on cashflow.”

He added: “Despite a glimmer of optimism in recent months, market conditions remain tough, with producer input and output prices rising annually.”

While the recent easing of inflation has raised expectations of an interest rate cut in December, respondents said high operating costs continue to undermine performance. More than six in ten manufacturing SMEs cited rising costs as a major challenge — the highest proportion across all sectors surveyed, ahead of construction, services and transport.

FIRMS SEEK CLEARER POLICY SIGNALS

With the Chancellor due to deliver the Budget, manufacturing leaders highlighted the measures they would most like to see. Reduced business rates or corporation tax were prioritised by 23% of those surveyed, as were low-interest loans or grants to support expansion and job creation.

Nearly half of manufacturing SMEs — 49% — said they were postponing investment decisions until after the Budget, reflecting the need for greater clarity on future policy direction.

Ryan said: “The Chancellor must act decisively in her Budget to unlock, not hinder, growth for the manufacturing sector.”

He added: “More broadly, the government still must deliver on the investment intentions it laid out in its Industrial Strategy too to give the manufacturing sector a fighting chance of being able to grow and thrive in 2026 and beyond.”

The survey results suggest ministers face mounting pressure to offer firm commitments on both payment reform and long-term industrial support if they are to restore confidence among manufacturers.