Tighter Rules Needed For Prompt Payment Code, Says Business Group

The Forum of Private Business (FPB) has called for changes to the Prompt Payment Code (PPC) after learning that large companies with payment times as long as 90 days are planning to sign up.

It claims that one of the UK’s largest household names is looking to sign the Code, despite increasing its supplier payment times in the months during the double-dip recession from 60 to 90 days.

A major UK supermarket has also recently signalled its intention to sign the PPC, despite increasing its non-food supplier payment times from 30 to 75 days in October last year.

Launched in 2008, the PPC aims to ensure prompt payment for suppliers, particularly for small businesses who are harder hit by cash flow problems and the knock-on effects for growth. Under the Code, companies agree to pay their suppliers on time and to follow set processes for any payment issues that may arise.

The FPB’s chief executive, Phil Orford, said that these larger firms were ‘clearly undermining’ the purpose of the PPC, although eligibility requirements would allow them to join.

The concerns follow the announcement that Business Minister Michael Fallon is to publically ‘name and shame’ FTSE 350 companies that fail to sign up to the code.

“There’s absolutely no doubt that we are going to hear of a number of big name brands agreeing to sign the Code ahead of Mr Fallon’s announcement, but if these firms aren’t prepared to decrease their payment terms then quite frankly what’s the point them signing? It would be a meaningless, self-serving gesture, and we hope the public can see this,” said Orford.

The FPB said that larger companies should be able to pay their suppliers on or by the end of the month following the month of invoice.

It has been claimed that small- and medium-sized businesses have sometimes waited up to 180 days to receive payment from the largest UK companies in return for goods and services.

“Certainly, those [businesses] that have painfully slow payment times should not be eligible to sign the PPC,” Orford added.