The Forum of Private Business is urging changes to the Prompt Payment Code after it has learned firms with payment times as long as 90 days are planning to sign up.
The FPB understands Unilever is the latest household name looking to sign the PPC despite having 90-day payment times for suppliers.
Unilever – which has confirmed its intentions – increased supplier payment times in 2010, from 60 days to 90 days, in the months between the UK’s ‘double dip’ recession. More recently, Sainsbury’s increased its non-food supplier payment times from 30 to 75 days, but only last month the supermarket giant indicated it will also seek to sign the PPC.
The Forum said this type of behaviour was clearly undermining the spirit of the PPC, even if it was not technically breaching the current eligibility requirements allowing firms to join. This, said the organisation’s chief executive, Phil Orford, shows the rules clearly have to be firmed up to prevent this type of abuse.
“We feel big businesses are cynically using the Prompt Payment Code to boast of their ethical credentials, when in fact they are anything but to their suppliers.
“No one can think 90-day payment terms are ‘prompt’, so why should companies with these terms be allowed to sign the Prompt Payment Code. It’s a ridiculous situation which has to stop.
The Forum said it was speaking out ahead of Business Minister Michael Fallon’s naming and shaming exercise later this month, which will see FTSE 350 listed companies who have refused to sign the PPC exposed by the minister.
“There’s absolutely no doubt that we are going to hear of a number of big name brands agreeing to sign the Code ahead the announcement, but if these firms aren’t prepared to decrease their payment terms then quite frankly what’s the point them signing? It would be a meaningless, self-serving gesture,” added Orford.
“We think that standard net monthly, that is payment on or by the end of the month following the month of invoice, is more than ample time to settle up. Our own research last year showed in fact most local councils are paying in under 30 days, with many in under 10 days, so if notoriously inefficient local governments can cough up this fast, we see no reason why big business can’t.