New research published today by Creditsafe, the business intelligence experts, reveals that 91 per cent of UK companies have seen an increase in defaulted payments from creditors in the last 12 months.

One in ten companies (10.4 per cent) has seen their level of bad debt, defaulted payments and monies owed beyond the period set out in their terms and conditions increase by more than 20 per cent in the past 12 months.

Almost three quarters (74 per cent) of UK companies are concerned about their exposure to bad debt.

Significantly, 16 per cent of businesses are very concerned that the levels of bad debt to which they are exposed will have an impact on the viability of their enterprise to continue operations in 2010.

Despite some commentators pointing to green shoots of recovery for the economy, over half of UK businesses (56 per cent) are more concerned about late and defaulted payments than they were 12 months ago at the height of the financial crisis.

Four per cent of UK enterprises are awaiting payment of at least £100,000 from creditors. Creditors are persistently failing to pay monies owed within the period set out in companies’ terms and conditions and the victims of late payment have significant paper losses on their balance sheets as a consequence. One in ten companies (9.7 per cent) has bad debts on their balance sheets that equate to at least 20 per cent of their annual profits.

David Knowles, Business Development Director, Creditsafe, said: “The ability of the UK economy to rise out of recession may be strangled by bad debt. Many companies are carrying huge levels of debt on their balance sheets, which if not recovered could see a dramatic increase in businesses entering administration.

”Bad debt is not a new issue for UK businesses but it is one which has left many dangerously exposed in this tough economic climate. In the past, businesses have been able to rely on the availability of credit from banks while they recover outstanding monies.

”However, as credit has become increasingly expensive and restricted, this is no longer the case and businesses are now struggling to contend with such high levels of debt and a greater number of defaulted payments.”

Six in ten (63 per cent) of UK businesses has taken steps in the last 12 months to help mitigate their exposure to bad debt and reclaim monies owed. Of those businesses that have made changes to their processes to recoup monies owed, the most popular option employed has been increased debt collection activity, with firms increasing issuing proceedings for recovery to force creditors to pay out.

More than four in ten (42 per cent) businesses that are actively reducing their financial risk are using credit referencing agencies or conducting online searches to build up a picture of the financial health of potential customers and business partners before signing any contracts.