The U.K. is launching a traffic-light warning system to spotlight large companies that fail to pay their suppliers on time.
The Sunday Times reported that the plan will be revealed this week by the nation’s Small Business (SMB) Commissioner Paul Uppal. The only details released so far have said that a red light will be shown to identify repeat offenders, as well as for companies that fail to publish their payment terms, which they are obligated to do twice a year.
Late payments, according to the Federation of Small Businesses (FSB), “[cause] about 50,000 businesses to fail every year."
Despite the U.K. launching a website for SMBs to file complaints about late-paying customers, the problem still persists. In fact, a recent FSB survey found that 84 percent of the country's business owners said they are regularly paid late, while one-third said at least a quarter of their owed payments arrive late. With that in mind, the FSB has urged U.K. Chancellor Philip Hammond to tackle the issue.
“The late payments crisis will only end when we see a fundamental cultural shift in the boardroom, with those at the top collectively addressing the issue and directors held accountable for supply chain support,” said FSB Chairman Mike Cherry. “Improving the nation’s productivity forecasts starts by speaking out on late payments today. In doing so, the chancellor will send a clear message to British boardrooms.”
In December, a report from the Business, Energy and Industrial Strategy Committee (BEIS) found that “supply chain bullying is all too commonplace" as payment terms expand. In fact, it noted that retailers WHSmith and Boots have payment terms that have stretched between 90 days to 120 days and from 75 days to 120 days, respectively. Travel agency Thomas Cook took an average of 88 days to get suppliers paid.
In addition, the FSB revealed that, in the last two years, 37 percent of SMB owners said their customers have forced longer payment terms on them, which resulted in cash flow issues.
