More FTSE 100 firms sign up to pay suppliers on time

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Companies including drinks giant Diageo (Xetra: 851247 - news) , fashion house Burberry and mining firm BHP Billiton (NZSE: BHP.NZ - news) have signed an agreement to pay their suppliers on time but the majority of Britain's largest companies still refuse.

They are among 20 FTSE 100 (FTSE Index: EO100.FGI - news) companies that have now responded to a campaign to tackle an “endemic” late payment culture among Britain’s largest firms which leaves small businesses struggling with cash-flow problems.

Labour MP Debbie Abrahams and several groups including the Federation of Small Businesses, the Forum of Private Business and the Institute of Credit Management wrote to the 75 FTSE 100 members that haven’t signed up to a voluntary agreement to promote good payment practices in July.

However, Ms Abrahams said the fact that 55 of Britain’s biggest businesses have not signed the so-called Prompt Payment Code (PPC) showed they were failing to “recognise their responsibilities as business leaders.” Sainsbury’s, Rio Tinto (Berlin: CRA1.BE - news) and GKN (LSE: GKN.L - news) have all previously refused to join the code. They said they would follow their own standards and were rejecting the PPC, not the principal of paying on time.

Ms Abrahams said of the firms who either ignored the letter or refused to sign the code: “There are direct parallels in these attitudes and behaviours to the culture associated with unethical tax avoidance and bonuses for poor performance.

“The bosses of these huge multinational companies seem to care nothing about SMEs struggling to survive because they can’t get paid for the work they have done.

“It’s repulsive and unacceptable business practice. We are telling SMEs that they are the backbone of the economy but we don’t treat them fairly in reality.”

It has also emerged that only a tiny proportion of small businesses are aware of a Government “mystery shopper” service that allows small suppliers anonymously to report bad payment practices among giant public sector outsourcers.

A survey of subcontracting firms found that almost 97pc had either never heard of the service or didn’t know what it was for.

The research, by Streetwise Subbie, which provides dispute resolution for firms in the construction industry, also found that 56pc were not aware of rules which require government contractors to pay suppliers in less than 30 days.

Almost three quarters of suppliers said they felt they were unable to challenge contractual terms of longer than 30 days even if the contractor was defying government rules by insisting on them.

Cabinet Office minister Francis Maude has pledged that the Government would “name and shame” its largest suppliers which do not pay within a 30-day limit.

However, despite evidence that firms are flouting the rules, the Cabinet Office has yet to publicly identify an offender.