Small corporate suppliers across the U.K. are struggling with late payments. The epidemic was the focus of many political debates ahead of the general election earlier this year, and Lloyds Bank has just released new data that found little improvement in SMEs’ ability to cope with waiting for their invoices to get settled.
One clothing store tycoon is reportedly set to tighten contracts with suppliers in an already strenuous environment. Sir Philip Green, who owns holding company Arcadia and is the head of Topshop and other retailers, is reportedly requiring suppliers to accept harsher payment terms.
Reports Tuesday (Aug. 4) said that Green will reduce payments for orders that the suppliers have already agreed to fulfill. Arcadia reportedly had already told suppliers that it will require a 14.25 percent discount on their invoices paid in 60 days. Now, the holding company is demanding a 16.25 percent discount.
The Daily Mail is said to have obtained the letter sent by Arcadia CEO Ian Grabiner. “We are notifying you of a further 2pc payment discount,” the letter wrote. “This will be effective from September 1, 2015 and will apply to all existing orders with a payment due date after August 31, 2015, as well as to all orders going forward.”
In an interview with the publication, one supplier said that it has “no choice but to stomach this.”
“If we turn it down, we won’t get orders next time. Anyone prepared to take on Philip Green is braver than we are.”
According to Arcadia, the additional discount is necessary to cover new investments and said it is investing millions in overseas operations. In its letter to suppliers, the company said that the discounts are intended “to help mutually grow our business together.”
Reports of Arcadia’s more stringent payment terms came just before Lloyds Bank released new findings on Wednesday (Aug. 5) that found that 20 percent of businesses across Britain are having trouble with cash flow and expect their situation to worsen before the year ends. Nearly one third of the survey respondents said that they are anticipating corporate buyers to defer payments.
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