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Suppliers unimpressed by government's payment terms legislation

Suppliers and factory owners remain unconvinced that government efforts to make supply chains more transparent will have any impact, as legislation to that effect is due to enter the committee stage at the House of Lords on January 7.

Under the Small Business, Enterprise and Employment Bill and draft secondary regulations the government is consulting on, which will be subject to renewed scrutiny this week, UK retailers will be forced to reveal every three months how long they are taking to pay suppliers and whether they have changed their terms.

Previously businesses had to state in their annual report the average number of days it took to pay creditors, but this requirement was scrapped last year.

A spokesman for the Department for Business, Innovation & Skills said: “Late payment practices are entirely unacceptable and we are introducing a range of measures that will empower small firms, and create a fair payment culture. Through [the bill] we will require the UK’s largest companies to report more frequently and comprehensively on their payment practices and policies.”

However, one supplier told Drapers: “It won’t make that much of a difference, as if a UK-based manufacturer doesn’t agree to demands on payment times there are competitors offshore that are better positioned to extend their terms.”

Another agreed: “I don’t think it will help. The big boys are a law unto themselves.”

One factory owner said the government should go further to help smaller suppliers. “They should put a cap on payment terms. Many small businesses are financing themselves in order to work with the big retailers.”

But he added: “That being said, it’s important people can see it’s a real struggle for small companies. The more transparent it is, the better it is for suppliers.”

John Miln, chief executive of the UK Fashion & Textile Association, said he welcomed “anything that delivers greater transparency” for suppliers.


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