The group found that 26% of invoices by large businesses are paid outside of agreed payment terms, dropping from 31% of payments reported in 2018. However, in 2023 large businesses took an average of 36 days to pay their invoices, a figure that has stayed largely the same since 2018 – down by just one day.
Nick Welby, CIPS chief executive, said: “The unprecedented disruption businesses and consumers around the world have witnessed in the last four years has taught us that when supply chains break down, the economy and consumers suffer.
“For supply chains to work well, everyone needs to be paid on time and within agreed terms. Failure to do so can result in a domino effect, rippling through the supply chain with each subsequent link at risk.
‘Unacceptable’ business practices
“Suppliers should not be expected to bankroll their customers and a culture of ‘buy now, pay at some point’ is not acceptable. Paying suppliers promptly not only strengthens relationships but can lower costs and, crucially, build resilience across supply chains – something that has been severely tested in recent years.”
These figures come from an analysis of the data submitted as part of the Government’s Reporting on Payment Practices and Performance Regulation. Large UK businesses that fall within scope of the legislation are required to submit data on their UK payments twice a year.
Despite this being a legal requirement, the number of submissions to the database has fallen every year since 2019, with 15,087 submissions in 2019 but only 12,829 last year. Organisations are in scope if they exceed two or all of the following thresholds: £36m annual turnover; £18m balance sheet total; 250 employees.
A Government consultation and review of current payment regulations was completed this year and is due to report shortly. One suggestion being floated is whether businesses should have to report on the total value of their late payments, as well as the number of payments.
If passed, this would reveal the financial impact poor payment practices are having on the UK economy and address concerns that the data is being distorted by businesses paying smaller invoices quickly while delaying larger ones.
Terry Corby, chief executive at Good Business Pays, added: “Failing large businesses often spread their financial weakness to their entire supply chain by delaying payments in an effort to hold onto cash. With a potential recession on the horizon, businesses must be extra vigilant about declining payment performance.
“It is clear from the falling volume of submissions that some businesses are ignoring the regulations entirely and are failing to input their data. Not only is this against the law, but it is symbolic of a culture of disregard towards the impact of late payments and the rules in place to tackle it.
“The approach of relying on businesses to police themselves on this issue is clearly failing and more robust penalties are needed to force large businesses to properly engage.”
The CIPS report did offer some shreds of optimism – businesses signed up to payment codes had better overall payment performance, with an average time to pay of 29 days and only paid an average of 16% of invoices late in 2023.