• How Many UK Businesses Use Invoice Finance?

    Analysis and research about how many UK businesses use invoice finance.Research recently published by IGF reported that 27% of businesses (with a turnover of between £1M and £500M) now use invoice finance. The survey, published in the IGF Powering Freedom Report, encompassed 500 UK businesses, within that turnover band.

    Percentage Of UK Businesses That Use Invoice Finance

    Whilst I was delighted to see such a high usage figure, the percentage appears much higher than the usage overall, but that may be reflective of the turnover banding that has been applied.

    It should be noted, as explained below, that almost 45% of UK Finance's member's invoice financing clients fall below the £1M annual turnover band.

    Back in 2014 we looked at the number overall and estimated perhaps 0.86% of all UK businesses use invoice finance. I have updated those figures below - and estimated the penetration of these products amongst those with a turnover in excess of £1M pa.

    How Many UK Businesses Use Invoice Finance?

    In total, in 2018 there were 5.7M businesses in the UK. That is according to a House of Commons Library Briefing paper. According to the UK Finance statistics (formerly the ABFA) at the end of Q2 2018, there were 40,333 clients attributed to their members.

    As I have said previously, there are a growing number of invoice finance companies that are not members of UK Finance, but the members account for majority of the largest UK providers. Bearing in mind that the client number have reduced slightly since my last estimate, it is not unreasonable to assume that my estimate of c. 3,000 additional clients, outside of the UK Finance membership, still holds. That would give a total of c. 43,333 users in the UK (note that the UK Finance numbers include 2,131 clients using import factoring, stock finance or ABL).

    That would equate to c. 0.76% of all UK businesses being users of invoice finance - just under 1%

    What Proportion Of £1M+ Turnover Businesses Use Invoice Finance?

    However, the majority of UK businesses are small and micro organisations, so the number that are within this turnover band (1M to 500M pa) would be significantly lower. A quick database search (fed by Companies House) revealed 116,371 businesses with turnover in excess of £1M per annum.

    Looking at the breakdown of the UK Finance clients, 22,332 have turnover in excess of £1M (that's 55.4%). So applying that same proportion to my overall estimate of the number of users of invoice finance i.e. including those providers outside of UK Finance, would give just over c. 24,000 users with turnover of £1M+.

    Expressing the 24,000 as a percentage of the total 116,371, suggests that c. 20.6% of businesses with a turnover in excess of £1M are users of invoice finance - almost 21%. This is not dissimilar to the 27% reported in the IGF research, and the limited number of interviews (500), or inaccuracies in my estimates, could easily account for the difference.

    Conclusions

    The usage of invoice finance amongst UK businesses turning over more than £1M pa is likely to be at least c. 21%, and although an almost equal number of smaller businesses (turning over less than £1M pa) use these services, the vast number of small and micro entities with in the UK means that the percentage using invoice finance is much lower, perhaps c. 0.3%. Therefore, overall, just under 1% of all UK businesses use invoice finance.

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marketfinance
hitachi
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woodsford tradebridge
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