November 09, 2012 - Rachel Miller
Business and enterprise minister Michael Fallon has warned big businesses that they will be publicly named if they fail to sign up to the Prompt Payment Code, a voluntary agreement to promote good payment practices.
The minister has written to all FTSE 100 and FTSE 250 companies. The letter urges companies to sign up to the code and warns that the names of any companies that fail to do so will be publicised in the new year.
Michael Fallon said: "Late payment causes real cash flow problems for entrepreneurs. It stops them from growing their business – we need to change the culture.
"Too many of our biggest companies are ignoring the Prompt Payment Code," he added. "My message to them is clear – make prompt payment a priority or face the consequences of being named. I'm confident that driving up support for the common sense principles in the code will have a very positive effect."
The Institute of Credit Management's Code demonstrates a commitment to good practice, and signatories are obliged to pay their supplier within an agreed time and to make sure there is a proper process for any issues that may arise.
Currently 1,182 companies are signed up to the Prompt Payment Code. However, only 27 FTSE 100 companies and five FTSE 250 companies are signatories.
Phil Orford, chief executive of the Forum of Private Business (FPB), said: "All too often we see a 'domino effect' of late payment right down the supply chain. It decimates cash flow and forces many firms into administration – so it is important that we do whatever it takes to reverse this trend and set in motion a culture of prompt payment for small businesses and the economy as a whole."
All signatories to the Prompt Payment Code are already publicly available online, but the government wants to be more proactive in highlighting companies that are not committed to the code.
The Prime Minister has already written to FTSE 100 companies to encourage take up of this initiative, which could deliver up to as much as £20 billion of new cheaper finance to their suppliers, including many UK SMEs.