The UK’s suppliers are calling for drastic penalties against serial late payers, with 68% saying company boards should be held legally responsible for their payment terms.
A survey of 817 UK and EU supply chain managers by the Chartered Institute of Procurement & Supply (CIPS) found that 64% also believe the Government’s new plans to prevent serial late payers from bidding for Government contracts will decrease late payments. This measure was introduced in September but no company has yet been singled out and the supply chain profession believes the Government will have to stand by their threat in order to make a tangible difference to payment culture in the UK.
The survey also found that British businesses are being weighed down by a chronic culture of long payment terms and late payments, with 16% of British businesses believing most payments in the UK are paid late. Only 5% of British suppliers believe all their invoices are paid promptly.
As the UK looks beyond the EU for trade following Brexit, the data also revealed that many potential trade partners have even worse payment records than the UK. Chinese firms are reportedly the worst performing with 32% of UK respondents stating that most payments from the country were late, with the United States next at 21%. Only 12% believe most of the invoices from the EU were paid late.
Earlier this year new powers were proposed for the Small Business Commissioner to tackle late payments, including the power to impose financial penalties or binding payment plans on large businesses found to have unfair payment practices. However, in October the Small Business Commissioner, Paul Uppal, stepped down from the role and a permanent replacement has yet to be found.
These measures have not been enough to prevent large businesses taking advantage of their suppliers to improve cashflow. More than half (51%) of UK companies believe large businesses in the UK force long payment terms on their suppliers because they know they can get away with it.
Malcolm Harrison, CIPS CEO, said:
“While the major political parties are eager to spend big on a range of election promises, we have yet to hear about any new policies to address a problem that money alone cannot solve, late payments. While there are pockets of good practice where payment is prompt, the UK’s rotten culture of late payments is eating away at the core of Britain’s economy. We must act diligently and swiftly to protect SMEs.
“Britain’s supply chain managers are clear that cultural change can only happen when the leaders at the top of Britain’s largest companies are made to answer for their serial late payment and take positive action to tackle the issue. You would not be happy if your employer decided to not pay your wages for 90 days, so why is it acceptable for companies to treat their suppliers in this way?
“Unfortunately, late payment is not just a British issue. As the UK casts its eye further afield as a result of Brexit, business leaders and politicians should be wary of late payments from abroad harming the UK payment culture still further and creating more payment delays which trickle down to affect UK SMEs.”
Notes to Editors:
About the Chartered Institute of Procurement & Supply:
The Chartered Institute of Procurement & Supply (CIPS) is the world’s largest procurement and supply professional organisation. It is the worldwide centre of excellence on procurement and supply management issues. CIPS has a global community of over 200,000 in 180 different countries, including senior business people, high-ranking civil servants and leading academics. The activities of procurement and supply chain professionals have a major impact on the profitability and efficiency of all types of organisation and CIPS offers corporate solutions packages to improve business profitability.
About the survey
These findings were drawn from a survey of 817 supply chain managers from the UK and EU. The survey ran from 19th August to 2nd September 2019. There were 714 UK respondents and 103 EU respondents involved in the survey.
Part of the survey asked respondents about how often they believed payments from different countries from around the world compared to the EU. In this instance those who selected ‘Don’t know’ were removed from the figures.