HALF of businesses in the region have been victims of late payment in the last six months, putting thousands at risk of going bust, research by insolvency trade body R3 has found.

The alarming figures come as a new bill will be announced in the Queen's Speech today aimed at tackling a problem that leaves British businesses more than £40bn out of pocket.

Business secretary Sajid Javid has pledged to crack down by introducing an enterprise bill, which will create a small business conciliation service to help tackle late payments. It will help businesses avoid expensive legal costs and maintain business relationships by reaching mutually satisfactory agreements, Mr Javid said.

As part of the latest wave of its regular Business Distress Index, which reports on the levels of growth and distress of companies across the UK, R3 found that 50 per cent of the companies surveyed in the North East, Yorkshire & Humberside had seen creditors miss their invoice payment deadlines. Across the UK, sole trader late payment victims are most likely to have most invoices paid, the research found.

Previous research by R3 found that late payment is a primary or major factor in one-in-five UK corporate insolvencies.

Neil Harrold, vice chair of R3 in the North-East and a partner at Hay & Kilner Solicitors, says: “Late payment puts unnecessary strain on a business’ cash flow, increasing the risk of insolvency. Despite government guidelines and business campaigns, late payment still remains all too common - rogue businesses know how much it costs others to chase down debts, and feel they can still get away with it.”

“When a business enters insolvency, customers can see this as an opportunity to further delay payments or avoid payment altogether. Doubts over cash flow caused by late payment can make it impossible to continue to trade a business in administration until a buyer is found.”

Ted Salmon, FSB North East regional chairman, said: “The weight of evidence showing the damage poor payment practices are having on the regional and national economies grows greater each day with the amount owed in late payments across the UK now at £41.5bn.

"Once again we find it is sole traders and smaller firms which are facing the brunt of late payments, and this is putting viable businesses at risk of closure.

“Addressing the UK’s poor payment culture – particularly among large companies towards their smaller suppliers – must be a top priority for any new government. Small businesses see progress on payment practices as a key benchmark of success for the new administration.”

Mr Harrold added: “It’s the smallest companies that bear the brunt of late payment. The consequences of late payments are magnified for smaller companies too - one invoice being paid late will have a disproportionate impact on a very small company compared to a larger counterpart.”