UK: Backbite - Payers - the quick and the dread.

UK: Backbite - Payers - the quick and the dread. - Slow payers are now under a belated scrutiny. Here we examine the best and worst.

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Last Updated: 31 Aug 2010

Slow payers are now under a belated scrutiny. Here we examine the best and worst.

Who's money is it, anyway? Who's a naughty boy, then? Who doesn't pay his bills, but keeps his creditors waiting and waiting ... and waiting? It won't do, you know. Everyone says so. There was Norman Lamont, our Chancellor, using his Budget speech to carry on about the problem that angers small businesses more than any other. "I have every sympathy for small companies who find that their larger debtors are deliberately delaying payment to boost their own cashflow. Such practices", Lamont added acidly, "are wholly deplorable." Quite.

British governments have fought shy about legislating against delayed payment of debts. But the Labour Party came out in favour of stern measures - by, among other things, giving the Office of Fair Trading powers to move against slow payers. The Tories have also promised action of a kind. Larger companies (how large are they, one wonders) will be required to reveal how long it takes them to pay up. And anyone hoping for a government contract would be wise to pay his subcontractors on the nail - well, within 30 days as a rule.

The CBI, prodded constantly by its own Small Firms Council, has long been exercised by this question. In February the CBI launched a "code of practice" for prompt payers. (That will have the other kind worried.) Late payment, pointed out the Confederation's president, Sir Brian Corby, is "a clear breach of contract". The code followed on from a survey of Small and Medium-Sized Enterprises (SMEs) that the CBI had published a year earlier, jointly with Cork Gully. Even 18 months ago, when the research was carried out (and the recession was still young), one business in five complained that it "normally" had to wait more than 75 days before getting paid.

But, of course, the names of the Old Laggards were not revealed. For some peculiar reason, suppliers are frequently chary of offending their customers. However it's not too difficult to find out who the worst offenders are. It's all there in the report and accounts now. Not the current figure for trade creditors, perhaps, but certainly the figure as at the last (available) balance sheet date, and the total amount spent on materials and bought-in services during the course of the last year. If they're not actually given in the accounts, you can arrive at expenditure on materials and services by subtracting the added value from the sales figure. Then all you need do is divide materials and services by the sum owing to trade creditors, and divide the answer into 365.

Now it might be argued that the result is theoretical, also that one cannot be doing with out-of-date numbers. But ratios tend not to change much from one year to the next, and small variations will not materially affect the rankings. And though managing directors have been known to load the vehicles in order to get the goods out of the door as the year-end draws near, it would hardly serve the cause of window dressing for the MD deliberately to bump up purchases at the same time.

Using the published figures, the two tables below list the 15 most dilatory payers in UK industry, and the 15 most prompt. The names are taken from a database, built up by independent consultant Dennis Henry, of the 250 largest publicly-quoted industrial and commercial companies in Britain. Categories such as property, energy, mining and financial services are excluded, since here special considerations apply. Wherever appropriate, the figures have been adjusted to allow for VAT. Special factors obviously apply to the names in the tables, too. The most striking features are the extraordinary predominance of construction groups among the sinners, and of motor distributors among the saints. It's no secret that the construction industry has been knocked sideways by the recession, so a miserly attitude to life may be justified on grounds of sauve-qui-peut. That doesn't explain why Henry Boot should apparently need 111 days to settle its bills while John Laing (despite what chairman Martin Laing described as last year's "thumping great loss") can manage with only 16. Nor, for that matter, why Rank seems to require 92 days when Ladbroke are able to pay up inside a fortnight.

But motor distribution is not recession-free either. The likely explanation for the car dealers' amazingly good showing is that the companies have put down deposits with the manufacturers; also they may pay for their fuel by direct debit. Thus many of their major purchases are probably made in advance, and other creditors could well be kept waiting a lot longer. In practice, the median period of credit that British companies seem to allow themselves comes out at 45 days. What we don't know, of course, is what the terms of trade laid down. Normally, the promise of quick payment ensures much the best terms.

It's surprising to find two retail groups among the readiest with the cheque book, even if one of them is the ever-virtuous M and S. There's a great deal to be said for having an impossible, demanding, domineering customer - as long as he also pays up.

THE SINNERS: ...

INDUSTRY'S SLOWEST PAYERS

NAME INDUSTRY DAYS CREDIT

Henry Boot Construction 111

Westland Aerospace 110

Christian Salvesen Food distribution 101

Bryant Group Construction 99

Lovell Construction 98

Crest Nicholson Construction 96

Rank Organisation Leisure 92

Wace Printing 86

AMEC Construction 83

Lilley Construction 82

Weir Engineering 80

Howden Group Engineering 80

Tilbury Construction 80

Conder Construction 78

Thomas Robinson Engineering 76

... AND THE SAINTS: THOSE WHO PAY UP FASTEST

NAME INDUSTRY DAYS CREDIT

Pentland Group Miscellaneous 4

Berisford Intl Food 8

Perry Group Motors 11

Ladbroke Group Leisure 12

Marks and Spencer Stores 12

Appleyard Motors 12

T Cowie Motors 13

Evans Halshaw Motors 14

Plaxton Motors 16

John Laing Construction 16

Lookers Motors 16

Barr and W Arnold Motors 17

Great Universal Stores 19

Lex Service Motors 19

Bass Brewers 20

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