The Business, Energy and Industrial Strategy Committee have published their correspondence with a series of major companies, highlighting issues such as long payment terms and late payments and prompting FSB national chairman Mike Cherry to call it “a late payment hall of shame.”
High Street stores exposed
Following up concerns about poor payment practices raised during the current inquiry on Small businesses and productivity and a previous inquiry into Carillion about the treatment of suppliers, the Business Committee wrote to a number of high profile companies including WH Smiths, Boots, Thomas Cook and Holland & Barrett.
The Committee asked each firm if they were signed up to the Government’s Prompt Payment Code (an initiative to address poor payment practices) and requested details of their payment terms and the time taken to pay invoices.
The results showed many respondents in a very poor light, exposing unacceptably long payment terms and late payments.
- WH Smiths: standard payment terms of 90 days, maximum payment terms of 120 days
- Boots UK have standard payment terms of 75 days, maximum payment terms of 120 days
- Holland and Barrett (who did not reply to the Committee’s letter): standard payment terms of 90 days
Small businesses are the ones who suffer
The replies also revealed other unfavourable payment terms SMEs can face. Boots UK’s standard terms include a 2.5% discount that they deduct “for all suppliers irrespective of size”, while Robert Dyas said that they include within their standard terms “a 2% settlement discount, with a policy of 0% for suppliers with less than £100k turnover”.
As for late payments, several companies took on average more than 60 days to pay an invoice. Thomas Cook PLC took on average 88 days, Britvic Drinks 86 days, General Electric Energy UK Ltd 77 days, Holland and Barrett 68 days and Waterstones Booksellers Ltd 65 days.
Rachel Reeves MP, Chair of the Business, Energy and Industrial Strategy Committee said:
“Small companies face a host of challenges in trying to grow and boost their productivity, not least in handling the difficulties they face when they are paid late.
“Supply-chain bullying is all too commonplace. The correspondence the Business Committee has received suggests payment terms are getting longer and that big, high-street companies are taking far too long to pay their suppliers.”
Is the Prompt Payment Code working?
The Prompt Payment Code (PPC) sets standards for payment practices and best practice and is administered by the Chartered Institute of Credit Management. While it is voluntary, signatories can be removed for non-compliance.
The Committee found that the majority of high-profile companies who replied were not signed up to the PPC, including WH Smiths; Boots; Siemens; Nike; Yodel; Thomas Cook; Punch Taverns; Warner Music; Manchester United Football Club; Arcadia; Robert Dyas; Aston Villa Football Club and Mears Group PLC. However, GlaxoSmithKline; Waitrose; Reed; Barratt; Capita and G4S were signed up to the code.
Many companies did not reply to the Committee’s request, including Manchester City Football Club; Britvic Drinks; Waterstone; Holland and Barrett and General Electric.
The joint BEIS and Work & Pensions Committee inquiry on Carillion highlighted the fact that the firm was signed up to the code but was enforcing payment terms of 120 days. Major construction company Kier and Mears Group PLC confirmed to the Committee they were not signed up to the Construction Supply Chain Charter, but Kier are signatories to the Prompt Payment Code.
Mike Cherry, national chairman of the Federation of Small Businesses, called some of the payment practices revealed “really shocking” and said the correspondence “uncovers a complete disregard for good corporate governance within some of the UK’s biggest businesses.”
“A big business waiting 80 days to pay a supplier is nothing short of disgraceful.”
He called the correspondence “a late payment hall of shame” and says the Government, through its Call To Evidence, must now urgently find solutions to end the UK late payment crisis, “which destroys 50,000 small firms a year, stifles economic growth and hampers productivity.”
He believes the only way to force a change of attitude within large companies is to appoint a Non-Executive Director responsible for overseeing supply chain practice, chairing a Supply Chain Committee alongside their Audit and Remuneration Committees.
“The case for such Directors has never been stronger,” he stressed. “Small firms shouldn’t be left waiting any longer.”
The replies to the Committee can be read here. What do you think of the “late payment hall of shame”? Would you like to see more done to combat late payments? Please share your thoughts.