Fintech Startup Ormsby Street recently released the findings of its payment performance survey comparing 20 of the biggest names in UK retail. Highest on the list of offenders were supermarket giant Tescos, who take a woeful average of 105 days beyond terms to pay its suppliers. Not far behind them were Iceland and Debenhams, (who take 75 and 73 days respectively), while the group average was shown to be 45 days beyond terms, clearly indicating that its standard practice for big businesses to squeeze their smaller suppliers.
A serious issue facing small businesses in the UK
Since previous research from the same group has suggested that the average overdue invoice to a small business was worth £6,142, these findings point to a serious issue facing small businesses in the UK. While many smaller companies hold winning a contract to supply a national retailer as a primary goal, Ormsby Street’s research suggest you should be careful what you wish for.
Further negative publicity for Tescos
Tescos, in fact, is no stranger to such criticisms having made the news In 2013, when Mike Dennis, an analyst at stockbroker Cantor Fitzgerald, suggested that Britain’s biggest supermarket had written letters demanding money from suppliers’ trading accounts – where payments are deposited by Tesco – to support its short-term profit margins. Last year, they garnered further negative publicity when they topped another list, for being the worst of Britain’s leading supermarket chains at complying with industry guidelines designed to protect suppliers.
Does the Prompt Payment Code really protect suppliers?
This latest research makes a mockery of Tescos’ position as a signatory of the Prompt Payment Code, a voluntary code of conduct championed by former business minister Matthew Hancock to promote 30-day terms as standard, with a 60-day maximum limit. To date, some 1873 businesses have signed up to the Code.
‘Fairer payment practices will help small businesses grow and create jobs.,’ said Hancock in a government press release. “This is a key part of our long-term economic plan to build a better Britain….Making small businesses wait an unreasonable time for payment is entirely unacceptable. I know first-hand the great burden that late payment can place on firms – and how it can strain family finances – which is why I am committed to stopping it.”