One in four invoices received by large businesses are paid late and there has been no improvement in the average time it takes to pay suppliers, according to analysis of UK Government data by the Chartered Institute of Procurement & Supply (‘CIPS’).
The findings highlight the entrenched culture of late payment within the UK business community and comes ahead of the findings of a Government review into payment practices.
Analysis of the payment data by CIPS reveals only a slight improvement in the number of late payments over the last five years. On average, 31% of payments were late in 2018. By 2022 that figure had dropped to 26% and it remains at that level so far this year. The numbers mean that large UK businesses are regularly missing their own contractual deadlines to pay suppliers.
There has also been no improvement in average time it takes to pay suppliers. In 2023, large businesses* took an average of 36 days to pay, a figure which has stayed remarkably consistent over the last five years and has fallen by just one day since 2018.
The figures come from an analysis of the data submitted as part of the Government’s Reporting on Payment Practices and Performance Regulation. Large UK businesses that fall within scope of the legislation are required to submit data on their UK payments twice a year. Despite this being a legal requirement, the number of submissions to the database has fallen every year since 2019, with 15,087 submissions in 2019 but only 12,829 last year.
A Government consultation and review of current payment regulations was completed this year and is due to report shortly. One suggestion being considered is whether businesses should have to report on the total value of their late payments, as well as the number of payments. This would reveal the financial impact poor payment practices are having on the UK economy and address concerns that the data is being distorted by businesses paying smaller invoices quickly whilst delaying larger ones.
However, there is cause for some optimism. Businesses signed up to payment codes have better overall payment performance with an average time to pay of 29 days and only paid an average of 16% of invoices late in 2023.
Nick Welby, CEO, Chartered Institute of Procurement and Supply (CIPS), said:
“The unprecedented disruption businesses and consumers around the world have witnessed in the last four years has taught us that when supply chains break down, the economy and consumers suffer.
“For supply chains to work well, everyone needs to be paid on time and within agreed terms. Failure to do so can result in a domino effect, rippling through the supply chain with each subsequent link at risk.
“Suppliers should not be expected to bankroll their customers and a culture of ‘buy now, pay at some point’ is not acceptable. Paying suppliers promptly not only strengthens relationships but can lower costs and, crucially, build resilience across supply chains – something that has been severely tested in recent years.”
Terry Corby, CEO, Good Business Pays, added:
“There has never been a more pressing time to address the damaging issue of late payments within the UK economy. Failing large businesses often spread their financial weakness to their entire supply chain by delaying payments in an effort to hold onto cash. With a potential recession on the horizon, businesses must be extra vigilant about declining payment performance.
“It is clear from the falling volume of submissions that some businesses are ignoring the regulations entirely and are failing to input their data. Not only is this against the law, but it is symbolic of a culture of disregard towards the impact of late payments and the rules in place to tackle it. The approach of relying on businesses to police themselves on this issue is clearly failing and more robust penalties are needed to force large businesses to properly engage.”
