The U.K.’s Institute of Directors has warned large businesses that the “scandal” of late payments is undermining the country’s economic recovery, and said the big corporations risked regulation by failing to pay their bills on time, the Financial Times reported.
The business group, which represents 40,000 company directors, was reacting to a complaint by a supplier to AB InBev, which owns the Budweiser and Stella Artois brands, that the brewing conglomerate was imposing payment terms of up to 120 days on small suppliers.
The U.K. Federation of Small Businesses also held a meeting with politicians from the main British political parties to identify ways of stamping out what it calls “supply chain bullying.”
AB InBev, which said it was reaching out to the supplier in question “to understand his concerns, of which we were not previously aware,” isn’t alone. Heinz, the packaged foods company best known for its ketchup, said it would not comment on reports that it has told some suppliers they would have to wait 97 days to be paid instead of 45. Baking company Premier Foods set off a political storm in December after telling suppliers that they could lose their contracts unless they made cash payments. It later backed down, saying it would revert to “a more conventional type of discount negotiation.” And the BBC reported last fall that the largest U.K. maker of Christmas pudding desserts, 2 Sisters Food Group, asked suppliers to wait for four months before it paid them.
Small and medium sized companies were owed nearly £40 billion ($60 billion) in 2014, according to data published by Bacs Payment Schemes clearinghouse. The debt burden has grown from £18 billion in 2008 and has exceeded the previous peak of £37 billion in 2012.
Two-thirds of Institute of Directors 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.”
Ironically, the stretching of payment terms in the U.K. comes at a point when the time required to complete payments is near real time, under the country’s Faster Payments Service. In the U.S., the Federal Reserve is pushing banks to get behind a same-day clearing effort.