Small businesses need a warning system to help avoid the “devastating” effect of long waits for payment, after new research shows almost two-thirds of large companies take at least a month to pay their bills.

Paul Uppal, the Small Business Commissioner, is to recommend the use of a “traffic light warning system” that will alert small firms to the potential of longer payment terms.

The call follows new data that found 65 per cent of UK large businesses have an average bill payment time of more than 30 days, while more than a fifth (21 per cent) of these reported an average of 50 days or longer.

Firms that take more than 30 days to pay are “in effect, using their supply chain to finance their businesses” and halting the ability of smaller businesses to grow, according to the study.

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