Earlier this month, the business secretary Vince Cable asked the Competition and Markets Authority to investigate the kind of “pay to stay” arrangements being used by Premier Foods. He accused the company of “demanding money with menaces”.
The Grocer, the Guardian and the FT are among media reporting on research by the Federation of Small Businesses, highlighting that 17% of member contacted by them said they had been bullied by the businesses they supplied over the past two years. The most common malpractices:
- pay to stay fees,
- excessively long payment terms,
- discounts for prompt payment,
- reducing outstanding money owed to a supplier by, for example, demanding “marketing contributions”.
The trade body is calling for the government to tighten the terms of the voluntary Prompt Payment Code, which seeks to encourage large businesses to set out clearly defined payment terms and name and shame those that fall short. More than 1,700 businesses have signed up to the code.
“The evidence clearly shows that practices like late payment are getting worse,” said Mike Cherry, FSB national policy chairman. “The Premier issue is symptomatic in that they were being so blatant about the demands they are making on their supply chain . . . (Late payment is) free banking. This very clear bullying is not what shareholders or consumers want, and we are making strong overtures to government to tackle it.”
In 2011 the EU issued a directive requiring all businesses to pay their suppliers within 60 days or face interest payments on money owed. However, the UK implementation of the directive allows businesses to agree longer terms. Despite this, many companies still insist on payment terms of 90 or even 120 days.
Instead of sporadic protests by food producers – currently milk prices are at a low level, see news from Muller Wiseman and First Milk – all sectors should unite in a demand to a price covering production costs and overheads.
Industry does not sell at a loss, why should vitally important food producers?