Voluntary code on payment terms will have no impact
THE Government’s launch of a voluntary code on payment terms is unlikely to spark a genuine move away from late payment culture in the UK, warns credit referencing agency Graydon UK.
Graydon’s warning coincides with the launch of the voluntary code, which aims to prevent companies from reneging on agreed payment terms.
The practice is commonplace among large businesses in the UK with Alliance Boots and Tesco named as being amongst the worst offenders.
The announcement follows the recent publication of research conducted by the Forum of Private Business (FPB) revealing that nearly two thirds (61%) of small firms in the UK are encountering greater difficulty managing cashflow compared with the first week of November.
However, Martin Williams, managing director of Graydon UK, is not convinced that the proposals will turn the tide of the late payment of suppliers in the UK, particularly in instances where small firms are the victims.
Mr Williams said: “There’s no doubting the positive sentiment which lies behind the Government’s introduction of a voluntary code but it is highly unlikely that this latest move will make a tangible difference when it comes to helping small companies manage their cashflow.
“Long before the economic crisis really began to bare its teeth, many large firms were habitually using their purchasing power to squeeze their suppliers through late payment, even though they had plenty of cash in their coffers to pay the bills when they finally chose to.”
He continued: “The difference now is that as the economic situation has worsened, even large companies no longer have the readily available cash required to pay bills and are failing to pay trade invoices simply because they can’t do so.”
