Voluntary code on payment terms launched
UK late payment culture ‘unlikely to change’
A scheme discouraging the UK’s late payment culture is unlikely to succeed, commercial credit agencies warn.
The voluntary code, which encourages the prompt payment of business bills, was launched this week by business secretary Lord Mandelson. The government hopes the code will prevent companies reneging on agreed payment terms.
Martin Williams, managing director of credit agency Graydon UK is not convinced that the proposals will change business culture. He said:
“There’s no doubting the positive sentiment which lies behind the government’s introduction of a voluntary code but it is highly unlikely that this latest move will make a tangible difference when it comes to helping small companies manage their cashflow.”
Research conducted by the Forum of Private Business (FPB) found that 61% of small firms in the UK are encountering greater difficulty managing cashflow compared with the first week of November.
Williams continued: “Long before the economic crisis really began to bare its teeth, many large corporates were habitually using their purchasing power to squeeze their suppliers through late payment, even though they had plenty of cash in their coffers to pay the bills when they finally chose to.
“This week’s government announcement alone won’t be sufficient to remedy this situation.”
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