The company insolvency rate in any given supply chain can increase dramatically due to non-payment by big brands, it has been claimed.
Phil Orford, chief executive of the Forum of Private Business, says one late payment can have repercussions that run the length of the supply chain, with a ripple effect of company insolvency following in their wake.
“All too often we see a ‘domino effect’ of late payment right down the supply chain,” he says.
“It decimates cashflow and forces many firms into administration.”
His comments come as business and enterprise minister Michael Fallon calls on major brands in the FTSE 100 and FTSE 250 to sign up to a ‘voluntary’ Prompt Payment Code.
Although the Code is not compulsory, Mr Fallon has threatened to name and shame those who do not add their names to it in time for the new year.
Of the 1,182 companies registered to the Code by November 8th, just 27 were from the FTSE 100 list of the UK’s biggest brands, and five more were from the FTSE 250 list.