The UK has the worst payment practices in Europe, according to a survey.
The research, carried out by CIPS, found Brexit was driving late payment culture as firms try to build a “cash flow buffer” to mitigate against potential disruption.
The survey, of 414 supply chain managers, found 12% said most or all UK invoices were paid late, compared with 10% across the EU, 9% in France and 7% in Germany.
The number one driver of late payment in the UK was improving cash flow ahead of Brexit, cited by 37%, followed by lockdown uncertainty (29%), though the data was collected before the latest lockdown.
Two-fifths (41%) of UK firms with EU suppliers said new clauses had been added to contracts to allow prices and other terms to be renegotiated if trade tariffs increase, while 17% said it was difficult to secure contracts that run until after January 2021.
However, the research found a minority of businesses were taking a more collaborative approach, with 9% saying they had been paid quicker during the pandemic, perhaps as a result of larger brands committing to pay smaller suppliers more quickly, a trend seen among supermarkets, retailers and in financial services.
Malcolm Harrison, group CEO, CIPS, called on companies to pay 95% of valid invoices within 30 days.
“Much of the UK economy is relying on government stimulus to survive, but there is a different way. By discarding irresponsible and outdated payment practices and embracing a collaborative, problem-solving approach, businesses can safeguard both their supply chains and their cash flow,” he said.
“If all UK businesses committed to paying 95% of the valid invoices from smaller businesses within 30 days, I believe it would have a transformative effect on the efficiency of the UK’s supply chain and the cash flow of SMEs, and create marked improvements to the UK economy.”
He added: “For too long some UK companies have seen late or delayed payments as a method for managing cash flow and improving financial performance. We should use this moment of awakening about the damaging impact on SMEs, to put an end to this practice.
“Now is the time to work collaboratively to support the UK economy, rather than pushing financial stress down the supply chain, only to resurface as a different problem of supply failure”.
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