Huge increase in business debt
Published: 08 June, 2009
GUILDFORD: As the first signs of economic recovery are viewed with caution, debt recovery firm, Lovetts...
has revealed "an unprecedented rise in volumes of bad debt being pursued for payment".
The total value of claims being taken through the court process by Lovetts on behalf of its clients in Q1 this year was 97% higher than Q1 2008, with the average claim up 60%.
Of these claims, 37.4% included claims for late payment interest and/or compensation, increasing from 31.6% in 2008.
In addition, Lovetts saw a 58% increase in the levels of debt being chased through letters before action (LBAs) with the average value of LBAs increasing by 20% (Q1 2009 vs Q1 2008). LBAs are used to secure payment, or to obtain a response from a customer before the commencement of a legal claim.
Earlier this month, Lovetts uncovered the fact that businesses are 'going legal' 39 days sooner than a year ago on unpaid invoices.
Charles Wilson, chairman and managing director of the company said: "The previous attitude towards frequent late payers may have been accepting and forgiving but the current tough climate is pushing businesses to press for payment on time in order to protect themselves.
"Our figures certainly suggest that British businesses are determined not to be victims of bad debt and will employ all the tactics available to get paid including pursuing debt through the courts.
"In particular, it is encouraging to see that a growing number of companies are exercising their right to charge for compensation and interest on late payments.
"Businesses need to ensure they are tackling late payment and bad debt head-on. For small businesses in particular, it can be a matter of survival or failure."
Lovetts' sole line of business is the recovery of overdue debts and any commercial litigation resulting from debtor/creditor agreements. For more information, visit the website.