Why some payments have to be made late

7 March 2012
Rebecca Ellinor, managing editor, Supply ManagementA lack of bank lending is one of the reasons behind later payments to suppliers, Steve Brittan, vice-president of the Birmingham Chamber of Commerce, told this morning’s Today programme. Brittan, who is also the managing director of BSA machine tools, was being quizzed following business secretary Vince Cable’s proposal for the government to create a new British Business Bank that would concentrate on lending to smaller firms. Brittan said regulation, the skills shortage and access to finance all presented problems to business. On the latter point he said: “If we look at JLR [Jaguar Land Rover] – a little bit of effort, some finance, and look at the result.” Asked what his company’s options were to invest in new equipment that would help them grow, Brittan said they were “extremely limited”. “The bank these days has little or no appetite whatsoever in assisting in working capital. Typically, we will pick up an order for £1 million of export market in the developing world and we find ourselves having to finance that, where traditionally you go to the bank, they fund the working capital, the bank charges interest, we make a profit and that’s the way of the world – or that’s how it used to be. "Now we have to go to our suppliers and talk about payment terms and, when we can afford to, make them in relation to the cost of build of product. We go to the customers themselves and agree stage payments and in some cases we operated some short-time working for a period so we were able to fund the projects.”

Last month we reported that the government was creating a working group to investigate late payment of suppliers and urging small firms to pursue organisations that delay the settling of bills. I think a huge part of that ‘investigation’ has just been done.

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