Debbie Abrahams: Let’s put an early end to large companies’ late payments

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SHORTLY after I was elected in 2011, a constituent told me his haulage business was on the brink of going under and that one of the key issues for him was that, in spite of contractual terms of 30 days, many large companies were taking well over 90 days to pay.

I started to investigate how wide scale the problem was and received a steady stream of contacts from local small businesses with the same problem which spurred me on to launch the Be Fair – Pay on Time campaign.

Following the global financial crisis, Labour worked alongside business organisations and the Institute of Credit Management to launch the Prompt Payment Code (PPC). But early this year I discovered that only 25 of the FTSE 100 companies were signed up to the Code.

And this at a time when, nationally, BACS say that over £36.4bn is owed to SMEs. To put that into context, high street banks lent just over £56bn to small businesses in 2011.

So along with partner organisations the Institute of Credit Management; the Federation of Small Businesses and the Forum of Private Business, we wrote to and invited the 75 top FTSE 100 companies who had still not signed up to the PPC to do so.

Since we began the campaign in the summer, 20 more of the FTSE 100 companies have now said they will sign up, or are reviewing arrangements to sign up, in response to the campaign. That means 55 of the top 100 FTSE companies have either refused to sign the code or simply failed to respond to two sets of letters from us

We should give credit to the 20 global companies who have agreed to sign up to the Prompt Payment Code as they are leading by example and committing to help SMEs across the UK. All are stating publically what they consider to be acceptable business practice; that they agree with prompt payments right along their supply chain and not lengthening their terms of payment to suppliers just because it suits them.

It shows they recognise how their actions affect the thousands of hardworking SMEs across the UK and that they are ready to be held accountable for their actions.

To those 55 companies who either said they wouldn’t sign the code, or didn’t even bother to respond, I say they fail to recognise their responsibilities as business leaders. Failing to pay their suppliers on time or putting up payment terms when they feel like it, just because they can, is unacceptable. It reflects a selfish ‘I’m alright Jack’ attitude.

There are direct parallels in these attitudes and behaviours to the culture associated with undeserved and bloated bonuses, inflated boardroom pay and tax avoidance. It’s repulsive and unacceptable business practice.

The public will begin to wonder just how far removed from the rest of society the people who control these huge companies are. These top companies should lead by example, sign up to the PPC and demonstrate what acceptable, ethical business practice is.

I am particularly appalled by Sainsbury’s who have backed 
the Government’s new supply-chain finance scheme but refused the Be Fair – Pay on Time campaigners’ request for them to sign up to the PPC.

Their refusal coincided with them lengthening their suppliers’ payment terms by 150 per cent to 75 days; a move that was exposed by the Forum of Private Business.

We are telling SMEs and entrepreneurs that they are the backbone of the economy and they’ll get us out of this recession but we don’t treat them fairly in reality. Our top business leaders should be leading by example; sign up to the PPC and demonstrate what acceptable, ethical business practice is. This really would be corporate social responsibility in action!

I want to be very clear. Be Fair – Pay on Time is not about demonising large companies over small companies – it is about fairness. It isn’t right that large companies by virtue of their wealth and power are able to ignore their contractual obligations and put such financial pressure on small companies.

As the FSB has said – late payment is not just an economic issue, but “it is ethically wrong”.

• Debbie Abrahams is Labour MP for Oldham East and Saddleworth