IoD: Late Payments ‘Scandal’ Undermining UK Economic Revival

The UK’s Institute of Directors (IoD) has warned large businesses that the ‘scandal’ of late payments is undermining the country’s economic recovery, and said that major corporations’ failure to pay bills promptly could be a trigger for regulation.

According to daily the
Financial Times
the business group, which represents 40,000 company directors, was reacting to a complaint by a supplier to AB InBev, owner of the Budweiser and Stella Artois brands, that the Belgian-Brazilian-US multinational brewing conglomerate was imposing payment terms of up to 120 days on small suppliers.

The UK Federation of Small Businesses (FSB) also held a meeting with politicians from the country’s main political parties to identify ways of ending what it calls “supply chain bullying.”

AB InBev said in response that it was reaching out to the supplier in question “to understand his concerns, of which we were not previously aware”. Other major firms cited include Heinz, which according to reports has told some suppliers they will have to wait 97 days to be paid instead of 45.

UK manufacturer Premier Foods made headlines after telling suppliers that they could lose their contracts unless they made cash payments. The company later promised it would revert to “a more conventional type of discount negotiation.”

The UK’s small and medium sized enterprises (SMEs) were owed nearly £40bn (US$60bn) in 2014, according to data published by Bacs Payment Schemes clearinghouse. The debt burden, which has grown from £18bn in 2008, previously peaked at £37bn in 2012.

Two-thirds of IoD members with fewer than 250 employees have suffered from late payments. James Sproule, chief economist for the Institute, said: “If large businesses continue to behave in this way, they are inviting regulation. Politicians are already discussing maximum payment terms and charging fines or interest for late payment.”

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