The Forum of Private Business (FPB) is urging the UK’s biggest businesses to sign up to the Government’s Prompt Payment Code.
Under the Late Payment of Commercial Debts Act 1998, small businesses have a Statutory Right to Interest (SRI), meaning they can in theory charge interest on late payments. However, few take advantage of this or are prepared to speak out publicly out of fears that large companies will simply take their business elsewhere.
The FPB recently named and shamed high street retailer Argos, which doubled the time it takes to pay suppliers from 30 to 60 days. In addition, it deducts a 4% ‘settlement discount’ from invoices it pays within that time.
“For too long, smaller firms have been squeezed so their bigger customers can create lines of credit,” said the FPB’s chief executive, Phil Orford.
“During the current economic climate, the damage being caused by late payment and enforced changes to terms and conditions is huge and many small businesses are facing closure as a result.”
Orford added: “This is not about the FTSE 100 companies having to pay early; it is about giving certainty and therefore creating stability throughout the supply chain by committing to a Prompt Payment Code. This commitment would help to develop much-needed confidence.”