Over 1 in 4 UK-based small and medium sized enterprises (SMEs) are forced to write off thousands of pounds in debt each year, according to Bibby Financial Services.

The ‘SME confidence tracker’ report for Q2 2016, which surveyed 1000 SMEs, found that 27% of UK SMEs have written off money in the past year, with the average value of unpaid invoices at £11,829 (€13,996).

Across the business population, this would equate to 1.4m SMEs.

David Postings, global chief executive, Bibby Financial Services said: “Bad debt is a chronic problem for SMEs and can lead to staff cuts, delayed investment plans and – at worst – insolvency.”

Though the study was undertaken before the UK’s referendum on EU membership, Postings warned that SMEs must look past Brexit-based uncertainty to protect their businesses from bad debt.

Postings added: “Following the UK’s vote to leave the EU there is clearly some anxiety amongst SMEs and throughout the wider economy. But now is the time for businesses to take growth and stability into their own hands and this must start by taking a more planned approach to chasing payment and protecting themselves against the effects of bad debt.”

SMEs in the construction sector were the most severely affected, with an average of £15,000 (€17,748) of written-off debt over the past year.

The average invoice payment time for SME customers is 38 days, and while this has reduced from 40 days in Q1 2016, it is a full week longer than 31 days in Q1 2014.

The Enterprise Act 2016 became law in May, and includes provision for a Small Business Conciliation Service to help settle invoices and reduce the impact of late payments.

Postings said: “Now is an ideal time for the new Secretary of State for Business, Energy and Industrial Strategy to set out the Government’s support plans on critical issues for SMEs, such as late and disputed payments.”