Private sector suppliers win 30-day payment term

Supporters of the smallest businesses are applauding the government for its decision to insert 30 days into the Prompt Payment Code (PPC) as the standard time for suppliers to be paid by.

Although still voluntary, the code and its new standard term will be “rigorously enforced,” thanks to a new enforcement body able to eject those who’ve signed up but fail to comply.

The government added that businesses would be encouraged over the coming days to join the 1,700 outfits already using the code, which stipulates 60 days as the maximum payment term.

Existing signatories were told this week that unless they can prove “exceptional circumstances” for not abiding the standard or maximum term, they face being removed.

The changes complement the tougher reporting laws in the Small Business, Enterprise and Employment Bill.

These new laws will force the UK’s largest companies to publish their payment terms, “increasing transparency and empowering small businesses,” the government said.

The enforcement body will be able to use this data to review the status of signatories to the code and challenge those that either do not pay their suppliers promptly or insist on excessively long standard terms.

“This is a sensible approach to dealing with the pernicious scandal of late payments,” reflected James Sproule, chief economist at the Institute of Directors and member of the PPC advisory board.

“Putting public pressure on the worst offenders is a key step in transforming the disparity of power between big business and their suppliers. This is a much more effective remedy than legislation”.

A spokesman for the board, Miles Gabriel, said that the thinking behind the revised code was to try to move the UK to a 30-day payment environment.

“Whilst it remains voluntary, it gives businesses the opportunity to advertise concern for their suppliers’ welfare and distinguish themselves from their competitors,” he said.

“This creates a commercial advantage for businesses that improve their payment terms, over those that are benefiting from imposing unreasonably long terms at the expense of their suppliers.”

But Mr Sproule believes that a long-term solution to the age-old scourge of late payment requires “a culture change” – “and this is something heavy-handed regulation cannot address.”

The UK’s freelancing trade body, IPSE, has a similar view, in that it believes that late payment as a problem “won't disappear until tough action is taken to change the whole culture of pay by big business.” One way to do this, it says, is to make the code compulsory.

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