A crackdown by the UK government on companies that persistently pay suppliers late has seen 17 companies ‘named and shamed’ for their poor performance.
Manufacturers GKN and Rolls-Royce, construction groups Balfour Beatty and Persimmon and delivery firm DHL are among the 17 either removed or suspended from the Prompt Payment Code (PPC), which requires those that sign up to pay 95% of all supplier invoices within 60 days.
“The PPC is a positive force for good and by naming transgressors we are supporting small businesses in the supply chain,” said Kelly Tolhurst, UK minister for small business.
“We remain committed to supporting small businesses against poor payment practice and are delighted to see that the PPC Compliance Board has acted to expose those whose payment practices fall outside of their obligations to treat suppliers fairly.”
The 17 companies named are among thousands that signed up to the PPC, which is administered by the Chartered Institute of Credit Management (CCIM) on behalf of the government, pledging to uphold its best practice for payments standards.
Crackdown on transgressors
The government first announced last autumn that it planned to tighten up the rules and crack down on signatory firms not complying with the Code. Last October it reported that nearly one in four UK businesses cited late payment as a threat to their survival.
The Federation of Small Businesses (FSB) has said tackling that tackling the problem could add £2.5 billion to the UK economy and keep an extra 50,000 businesses open each year.
From this September, suppliers bidding for a government contract above £5 million will be required to answer questions about their payment practices and performance, with the expected standard of paying 95% of invoices in 60 days.
A review of whether companies that signed up to the Code are meeting this standard has completed its first phase and identified 17 companies to be removed or suspended.
The five being removed are: global mining group BHP Billiton; logistics business DHL; manufacturer GKN; international construction company John Sisk; and tea producer Twinings.
The 12 companies suspended are: Atos IT services UK & Ireland; Balfour Beatty; British Sugar UK; Costain; Engie Services; Interserve Construction; Kellogg Brown & Root; Laing O'Rourke; Persimmon Homes; Rolls-Royce; SSE; and Vodafone.
CICM chief executive Philip King commented: “The Board is disappointed with the actions of a minority who continue to treat their suppliers unfairly and has no satisfaction in having to name them publicly.”
Responses from the 17
Rolls-Royce told Sky News that its suspension was “disappointing”, adding that it offered 30-day payments to many smaller suppliers and paid 90% of invoices on time. Its long-term contracts with major suppliers had been mutually agreed at 75 days, which partly explained why it fell below the compliance criteria, and the way it had designed payment terms was “in keeping with the spirit of the code”.
Twinings said it was “continually looking to improve” its prompt payment performance and that over the past six months the average payment period for supplier invoices was 37 days.
Construction group Balfour Beatty said it was “committed to paying its supply chain partners on time and to mutually agreed terms” adding that recent changes to the code would “take time to work through”, while Persimmon said it was fully supportive of the Code and working towards achieving the 95% target.
Vodafone said it aimed to pay small suppliers within 30 days but had some longer payment terms with “very large organisations” and was “continuing to make improvements”.
SSE said its suspension was disappointing and it had been making “widescale changes to improve payment performance". GKN said its poor performance related to a single unit of the company, GKN Automotive, which had submitted a plan to move to full compliance with the code as soon as possible.
A Costain spokesperson told Sky News: “Costain was an early signatory to the PPC and we are taking action to ensure we comply. Since January this year we have moved all our suppliers onto payment terms of 45 days or less. We acknowledge that we have more work to do to ensure our suppliers are paid within 60 days and are committed to achieving this by the end of the year.”
Laing O'Rourke finance director Stewart McIntyre called for a collaborative approach. He said: “Laing O'Rourke works closely with its loyal supply chain and is committed to the improvement of average payment terms and a return to top-quartile payment performance. This goal is set against the context of unprecedented volatility in our sector, and ongoing market and political instability.”
A British Sugar spokesperson said: “We take paying our suppliers on time very seriously and we know our current rate of late payment is not good enough. However, we have been working hard to make improvements and will continue to focus on this as a matter of urgency.”
Late payments - UK spring statement to have limited impact UNLESS
Previse warn that UK Government’s plan to make it easier for tradespeople to get the cash they’re owed will fail, unless enforced
Late payment is bad for business – yet 27% of UK invoices paid late
Keeping suppliers waiting beyond the payment terms for invoice payment makes no economic sense and is damaging the supply chain – yet 27 per cent of invoices are paid late in the UK
Late payment is the silent killer of modern business and it’s getting worse
Survey shows that 62% of invoices issued by UK SMEs in 2017 (worth over £21b) were paid late
Some late payment practices in UK are despicable
Lloyds Bank analysis of government report reveals what is happening; new solutions are needed