Double standards on payments: UK businesses squeezing suppliers
Businesses are paying their suppliers even later, despite admitting that they have a responsibility to smaller firms, according to early findings from the 2022 European Payment Report.
The annual report by credit management services company Intrum surveyed more than 11,000 businesses in 29 countries. It found the business landscape under pressure from new uncertainty, while struggling to recover from the impact of the Covid years.
Late payment breaking business trust
In the UK, 68% of respondents said paying on time is critical to maintain trust with suppliers, and seven out of 10 (69%) believe that large businesses have a responsibility to pay smaller suppliers on time.
However, an increasing share (67% compared to 58% in 2021) say that large multinationals/corporates have asked them for longer payment terms than they feel comfortable with.
This is despite the fact that government strengthened the Prompt Payment Code, adhered to by almost 3,000 companies last year. From July, subscribers to the code must pay 95% of invoices to small businesses within 30 days, down from 60 days.
According to the European Payment Report, more than half of UK businesses (51%) admit that they pay their suppliers later than they would ever accept from their own customers. This is much higher than the European average of 33 per cent.
This is despite the fact that a majority, 6 out of 10 businesses, believe that payment times are so central to sustainable business behaviour that they should form part of businesses’ required sustainability reporting.
“Late payments are a perennial problem, but in the current environment it is worrying to see larger businesses increasing their demands on smaller suppliers,” says Eddie Nott, Managing Director for Intrum UK & Ireland. “Many of these businesses have been weakened by Covid and are unable to hire employees and develop their products and services in the way their otherwise would.”
Sustainability moving up the agenda
However, there are causes for optimism. Businesses are putting sustainability high on the agenda, with 65 per cent saying they have accelerated their efforts to be sustainable in the last year.
Customer pressure is a key factor – in the UK 59 per cent say they will rapidly lose customers if they aren’t seen to be taking their environmental responsibilities seriously.
The report’s findings indicate that faster payments could lead to a boost in the sustainability efforts: 66% say that it would enable them to improve their sustainability performance.
In addition, 67% of companies say that prompt payments would make it possible to pay their own suppliers faster and 46% believe that they would be able to hire more employees.
“It is heartening to see that businesses are focusing on sustainability,” said Nott. “It is important to realise that faster payments and good business practices around payments enable businesses to take the action they need across a range of areas. While the Prompt Payment Code reforms are a welcome acknowledgement of the importance of timely payments, businesses are still suffering from poor payment behaviour.”
The full European Payment Report 2022 will be published in June.