Almost half of UK Small and Medium sized enterprises have lost an estimated £5.3bn in debts owed by trading partners who have gone bust, according to new research.

The research, published by CreditPal, a business support agency geared towards small businesses, estimates that 43 per cent of SMEs have lost monies owed to them in the last two years.

The study also revealed the average amount owed to an individual SME in the UK was £7,500, highlighting a need for small businesses to ensure better awareness of their trading partner’s financial status.

Chris Poll, chief executive of CreditPal, said: "The amount left owing to SMEs as a result of company liquidations is shocking and threatens the survival of some UK businesses."

Steven Jackson of beat my debt warned that the problem is likely to get worse not better. "There were approximately 20% more company liquidations in 2009 than 2008. Many more companies are in financial difficulty and this will have knock on effects if they fail" he said.

London companies worst effected

SMEs based in London have suffered most from defaulted payments, with 49 per cent owed money by trading partners who have gone into liquidation. SMEs based in Scotland fared better due to less exposure to bad debt, with just over a third (36 per cent) affected.

"It is imperative that companies take every step to mitigate their exposure to the risk of defaulted payments, especially as the economy climbs out of recession when the need for cash is even greater" Poll added.

The professional services sector has been worst affected by losses, particularly the accountancy and legal services fields. Least affected were the hospitality and leisure industry sector.

Poll continued: "Ignorance of a business or trading partners’ up-to-date financial position is not an excuse; it is up to the individual enterprise to determine an acceptable current exposure to financial risk."