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15 October 2013 | Paul Snell
Prime Minister David Cameron has pledged to tackle late payment of suppliers, with the announcement of a consultation on the issue later this year.
The consultation will question how responsibility for payment can be addressed by senior management and at board level, how the government’s own Prompt Payment Code (PPC) can be strengthened, and how vendors can be encouraged to exercise their right to interest on late payments.
“It’s not right that suppliers are not getting paid on time for the work they do and the services they provide and I know that late payment can have devastating effects on our small and medium-sized businesses,” the Prime Minster said. “The government has already taken steps to help address this issue but I am clear that more needs to be done to build a business culture across all sectors of the economy that sees the fair, prompt and reliable payment of suppliers become a core corporate responsibility which is taken seriously at the most senior levels.”
There is both UK and European legislation in place to prevent late payment, and the consultation will examine if more can be done to enforce the provisions within, but according to Philip King, chief executive of the Institute of Credit Management legislation is not the only solution.
“The EU Payment Directive allows businesses to charge interest in late payment, and there are additional charges for delays that are in effect ‘fines’ by any other name,” he said.
“It is not ‘fines’ that we need, but rather a change in culture and attitude to payment, and that has to be driven from the top as an intrinsic part of an organisation’s corporate responsibility. Prompt payment promotes sustainability within the supply chain that is essential to mutual success.”