Phil Orford, chief executive of the Forum of Private Business calls on the government to act on the scandal of late payment.
On the eve of the Business Department announcing how many of the FTSE 350 they have persuaded to sign up to the Prompt Payment Code, the Forum of Private Business is worried that Number 10 continues to remain silent on this unethical business practice.
For 10 years the Forum of Private Business has run a Hall of Shame, an online list of big businesses who are extending their payment terms to our members, small employing businesses that form the backbone of private business in the country. Recent additions to the Hall of Shame include GlaxoSmithKline and Sainsbury’s, the latter having recently increased its payment times to some suppliers by 150% (30 to 75 days).
Make no mistake, late payment is the scourge of small business. BACs estimate up to £37bn is tied up at present in unpaid invoices, and for once it is the private, not public, sector that is most to blame.
The furore around rates of Corporation Tax paid by multi-national companies has firmly swung the spotlight on corporate ethics. However, while peer pressure, terrible news headlines and political cajoling have persuaded some to up the tax rates they pay in the UK, late payment remains an unresolved issue.
Firstly, credit where it’s due. The Business Minister, Michael Fallon, has written to the FTSE 350 to encourage them to sign up to the Prompt Payment Code, an independent code promoting good payment practices.
Good work is being done on the opposition benches too, with Debbie Abrahams’ Be Fair, Pay on Time initiative. Between them, they have encouraged a greater sign up to the Prompt Payment Code. Furthermore, central Government departments remain pretty good payers when it comes to promptness, with a few notable exceptions within the NHS. The picture at local government level is more mixed, as some extensive Freedom of Information requestswe made last year found.
Yet one clear and key player remains silent on the issue – Number 10. Glance through the PM’s own contributions since he was elected an MP in 2001 and you will struggle to find a single reference to the issue in the House of Commons. It seems Number 10 is similarly reluctant to comment on the issue now.
Late last year they showed a rare foray into payment times. At a small conference attended by the PM in person, the Government made a call for more big businesses to sign up to offer supply chain finance. In this way of paying businesses, the prime contractor will pre-approve invoices in order that a bank can advance the money to smaller supplying businesses.
So far so good, until you find out this advance is still a loan, with the small business paying the interest. So, whilst it reduces the costs for small businesses it doesn’t get rid of them altogether, a situation that be entirely resolved if businesses were paying promptly in the first place.
In fact, the situation is even worse. Some of the very same companies that signed up to offer supply chain finance have, in parallel, extended their payment times even further!
The FPB applauds the Business Minister’s and others’ efforts on this issue. But the real drive comes from Number 10 if we want sustained change of this archaic and fundamentally unfair business practice.