Barclays tells big business to pay up as small firms face cashflow crisis
Barclays has warned that big businesses are threatening smaller suppliers’ survival with late payments after figures revealed 90% of medium sized firms were waiting for customers to settle overdue bills.
The bank found that more than nine in ten medium-sized companies were waiting for big businesses to pay up on debts, while two in five smaller businesses said that the situation of late payments had been exacerbated by the pandemic, in a survey reported by the Times today.
Hannah Bernard, head of business banking at Barclays, said that Barclays wanted to “unite the small business community” to tackle the issue and “raise the social conscience of larger businesses who don’t pay on time”.
The figures come as Small Business Commissioner Liz Barclay warns exclusively in City PM today that the UK is facing the loss of 444,000 small businesses because of poor payment practices.
She said: “Paying quickly pays everyone. It’s folly to pay late or to inflict extended payment terms on suppliers. It’s theft not to pay at all. We need to revolutionise business-to-business payments.
“In the same way that employees can’t be paid with a 4 months delay, small suppliers shouldn’t endure late and delayed payments. The levelling up of any area starts with the small firms, sole traders, micro businesses and freelancers operating there.”
Payment terms have been extended by many big firms through the pandemic as businesses become hypervigilant over cash flow.
Simon Geale, Executive Vice President at specialist procurement consultancy Proxima, said that many bigger firms had looked to push payment terms beyond 45 days during the pandemic as they looked to protect working capital.
He told City PM: “During the pandemic cash became king, and a lot of large businesses looked to rapidly improve their cash positions. There were also instances where daily cash calls might look at whether to pay failing suppliers at all, not a nice tale, but the reality of a crisis.”
Geale said that the solution to this crisis for small businesses could come via government intervention.
He added: “Ultimately the simplest solution would be regulation, and the government has taken some action on this with the prompt payment code and its focus on social enterprise and social value.”