A recent study has revealed that a significant proportion of small business owners in the UK are paying themselves well below the National Living Wage in order to keep their operations running. The research, conducted by Enterprise Nation as part of its latest Small Business Barometer, found that 76% of small traders are compensating themselves with less than £20,000 annually for nearly 50 hours of work per week. This equates to approximately £7.75 per hour, substantially lower than the current National Living Wage of £12.71 for adults over 21.

The report highlights the disparity between the long hours small business owners commit and the modest financial returns they receive. Many owners are prioritizing employee wages and business expenses over their own compensation, a practice that Enterprise Nation’s CEO Aaron Asadi described as unsustainable. He noted that business owners are absorbing financial pressures themselves to protect their staff and customers.

The study also points to a growing reluctance among small business owners to seek external funding. Only 40% plan to apply for financing in the next year, marking the lowest projected borrowing rate since the Barometer’s inception in early 2023. Among those seeking funds, there has been an increase in requests for smaller amounts, with 40% intending to borrow less than £10,000, up from 27% the previous year. Experts suggest this trend may indicate businesses are borrowing primarily to maintain current operations rather than pursue growth.

Late payments remain a significant challenge for small businesses, with 42% reporting delays from customers over the past year. This represents a sharp rise compared to the 24% to 34% range consistently recorded in 2023 and 2024. The issue is expected to be addressed, at least in part, by the proposed Commercial Payments Bill announced during the 2026 King’s Speech. The legislation seeks to improve cash flow for suppliers by capping payment terms from large companies at 60 days, mandating interest charges on overdue invoices, and enhancing enforcement against habitual late payers.

The Small Business Commissioner estimates that around £26 billion is currently tied up in unpaid invoices, underscoring the scale of the problem for small enterprises. The forthcoming legislation aims to alleviate some of these financial pressures and support the sustainability of small businesses across the UK.