The UK’s Prompt Payment Code Sees Laggards

In the U.K., mandates to get larger firms to pay smaller suppliers and contractors with speed seems to be hitting some speed bumps. In Scotland, a trade group urges the protection of funds slated to pay contractors. In Illinois, legislation aims to pay suppliers on capital projects within shorter time frames.

Mandating a change to late payments can have its speed bumps. To that end, in the U.K., 17 companies were removed or suspended from the Prompt Payment Code during the first quarter of 2019, as noted by the Chartered Institute of Credit Management (CICM).

The code requires for companies that sign on to it to pay 95 percent of all supplier invoices within 60 days (the companies that were removed had not been adhering to the tenets). Thousands of firms have signed on to the code, according to the CICM.

The aforementioned suspensions and removals came in the wake of a review of the data, reported publicly by large companies. The CICM said there are likely to be more suspensions and removals via a second phase of review that are reportedly underway.

Five firms, including BHP and DHL, have been non-compliant with the code, and the CICM said they have also failed to submit plans on how they will get into compliance. Other companies have been reinstated, as they had been non-compliant, but had submitted plans to become compliant on paying their suppliers in a timely manner.

Separately, the Chartered Institute of Procurement & Supply said, according to the U.K.’s The Times, that a significant number of larger firms have not been compliant with the “duty to report” rules that eye late payments. The reports have been mandated since 2017, and seek to have companies detail how long it takes to pay suppliers. Data from the institute has shown that as many as 15,000 companies should have reported those results by now, but fewer than 14,000 submissions have been recorded.

In Scotland, the Specialist Engineering Contractors’ Group said that funds held back in accounts to pay small and mid-sized suppliers — known as retention monies — need to be protected. Project Scotland reported that the Group also said Scottish councils should be “more proactive” in making sure that smaller firms get paid on time. Poor payers, said the Group, should be banned from council works contracts.

In terms individual company news, Rolls-Royce, the car maker, said last week that it had been suspended from the Prompt Payment Code, as it had not been paying suppliers on time (again, to the aforementioned standards of paying 95 percent of suppliers within 60 days).

“The significant volume of invoices we receive from our large suppliers — and the removal of the consideration of our preferential treatment for smaller suppliers — has pushed us below the compliance criteria,” said Rolls-Royce in a statement.

Moving to domestic news, in Springfield, IL, new legislation would require state capital projects to pay their suppliers and subcontractors more quickly. The bill, introduced in the State Senate, truncates the payment period from 15 days to seven days for a prime contractor to pay its smaller suppliers.

“This is to help our small businesses grow,” said State Senator Ram Villivalam (D-IL), the bill’s sponsor, according to Shaw Media’s The Times.