Rolls-Royce named and shamed over late payments

Derby manufacturer Rolls-Royce has been suspended from the Prompt Payment Code (PPC), which requires those who sign up to pay 95% of all supplier invoices within 60 days.

The Code is part of stricter government guidelines designed to tackle the problem of late payers introduced last autumn. In total, 17 companies have been removed.

A statement from Rolls-Royce said: “[We] understand that recent changes made to the assessment criteria for the UK Government’s Prompt Payment Code, administered by the Chartered Institute of Credit Management (CICM), have resulted in our suspension from the Code – specifically, in respect of our failure to pay at least 95% of our supplier invoices within 60 days.

“We make well over 500,000 payments to suppliers every year and adopt a flexible approach which matches payment terms to the requirements and capabilities of our suppliers. Firstly, we differentiate between our smaller suppliers, whose interests the Code champions, and our larger suppliers, applying appropriate and jointly agreed payment terms to each. A shorter preferred payment term of 30 days end of week, is available for our many smaller suppliers around the world. Secondly, we consider the option of early payment to suppliers who are facing financial constraint. Thirdly, we offer supply chain financing, at attractive rates, which enables our suppliers to receive their payment sooner if they wish.

“This approach, together with our commitment to shorter payment terms for smaller suppliers, was sufficient for us to meet the criteria when we signed up to the Code in 2012, and were re-confirmed in 2016. Nothing has fundamentally changed in our approach since then – as a group we pay around 90% of our invoices on time. We have long-term contracts with larger suppliers where payment terms have been mutually agreed at 75 days end of week. Previously we were able to balance these against the more preferential treatment we offer smaller suppliers, and remain compliant with the Code. Following a change in assessment approach, this is no longer the case.

“We continue to believe the way we have designed our payment terms is in keeping with the spirit of the Code. However, the significant volume of invoices we receive from our large suppliers – and the removal of the consideration of our preferential treatment for smaller suppliers – has pushed us below the compliance criteria as it is now being assessed.”

Kelly Tolhurst, minister for small business said: “The Prompt Payment Code is a positive force for good and by naming transgressors we are supporting small businesses in the supply chain.

“We remain committed to supporting small businesses against poor payment practice and are delighted to see that the Prompt Payment Code Compliance Board has acted to expose those whose payment practices fall outside of their obligations to treat suppliers fairly.”

Five companies have been removed from the Code for non-compliance and not providing a plan for how they will meet the terms of the Code. They are:

BHP Billiton – a global resources business
DHL – a global logistics business
GKN Plc – a multinational aerospace and automotive components business
John Sisk & Son – an international construction company
Twining and Company – a purchaser and seller of tea, coffee and other beverages

Twelve businesses have been suspended from the PPC, for not paying their suppliers in line with the Code, but they have committed to make changes to meet the standards of the Code and pay suppliers promptly. They are:

Atos IT Services – an IT services business and main UK subsidiary of Atos SE
Balfour Beatty – an international infrastructure group
British Sugar UK – a British producer of sugar for the UK food market
Costain – a construction and engineering company
Engie Services – a facilities management services company, part of Engie Group
Interserve Construction – a construction company owned by Interserve Group Limited
Kellogg Brown & Root – a facilities management and construction engineering company, part of KBR Inc.
Laing O’Rourke – an international engineering business
Persimmon Homes – a UK house building company
Rolls-Royce – an engineering business focused on power and propulsion systems
SSE – electrical and telecoms provider
Vodafone – a telecoms company, part of the multinational Vodafone Group Limited