UK Needs Universal Prompt Payment Culture
Britain’s biggest business group the CBI says that a universal culture of prompt payment needs to be fostered in the UK…
Responding to the government’s late payment consultation, the CBI has called for a culture of prompt payment to be adopted amongst all the country’s businesses.
Figures from the business group indicate that outstanding late payments currently stand at over £30 billion and that the average UK business is owed £31,000.
Now that the economy looks like it is back on track, the CBI argues that this is the time that businesses really need their working capital.
In an attempt to tackle the issue of late payments the CBI is suggestng the following recommendations:
- All businesses should publish their payment policies on a voluntary "comply or explain" basis
- Intorducing a maximum payment term for firms to target. This can be flexible because complex contracts may require different terms.
- A new "upper tier" for businesses that want to achieve even higher standards as part of the Prompt Payment Code; examples include paying in even shorter timeframes or providing greater depth to payment performance reporting.
- Big businesses should not only publish clear guidance on their supplier payment policies on their websites but should also provide online finance platforms to help smooth out the payment process.
- The Government should take greater steps to define the legal term "grossly unfair" in contract law, meaning that firms will have greater cinfidence when negotiating payment terms.
Matthew Fell, the CBI’s Director for Competitive Markets, said of the :
“Most companies agree and stick to fair payment terms but we need to create a culture of prompt payment in all businesses.”
“It’s unacceptable that many firms are being held back from growing and creating jobs because they are owed thousands of pounds.”
On the subject of making policies more transparent, Fell added:
“We want to see companies explain their supplier payment policies clearly on their websites. And we want to see the introduction of a target maximum payment term, with some built in flexibility for more complex contracts.”
However, the CBI Director for Competitive Markets did say that his organisation was wary of being too restricitive;
“Supply chains should be collaborative, so we must avoid a heavy-handed approach to regulating payment, which could actually drive custom overseas away from UK firms.”
With this in mind, mandatory maximum terms and agency enforcement or blacklisting is discouraged by the CBI.