Economic Sustainability: Pay up or Else

SMALL BUSINESSES are waiting up to 180 days to be paid for the services and products they provide to larger companies. One well-known company apparently waits almost 200 days – or around seven months – before paying its small suppliers. 

  • Government set to name and shame big companies that don’t pay suppliers on time

 

Now the business and enterprise minister, Michael Fallon, has had enough and is “going to war” on the issue. In an interview with the Sunday Telegraph he revealed plans to name and shame the companies that don’t pay promptly.

 

“Large companies are sitting on an awful lot of cash at the moment and it is simply not fair if they don’t pay their suppliers or sub-contractors on time. That is why I have urged the largest companies to sign up to the Prompt Payment Code, which is five years old this month.

 

“I wrote to all chief executives [in the FTSE 350] back in October, since when 54 more companies have signed up, half of those from the FTSE 350, but there are still many more to go. And next month I am going to list those who haven’t signed. They have got another month to sign up.”

 

Since the financial crisis, payment terms have been extended by many companies. The Forum of Private Business has a late payment “hall of shame”, with Sainsbury’s and Molson Coors the most recent additions.

 

Recent figures from BACS payment processing reveals that £36.5bn is owed to small firms in late payments. “Cash flow is the lifeblood of small companies,” Fallon added. “Poor cash flow is how small businesses go under. £35bn owing would average out at around £30,000 per small company if you do the maths.”

 

The government’s latest research shows that smaller suppliers wait on average 41 days longer for payment than their contract stipulates.

 

"For the sake of small businesses and the economy, the Government must prioritise tackling the culture of poor payment, addressing the bully boy behaviour of these bigger companies,” said the Forum’s policy advisor Robert Downes.

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