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Despite the best intentions of the Prompt Payment Code, it seems the voluntary commitment is failing to do much to reduce the risk of corporate insolvency for some suppliers.

Indeed, in many cases, late payment leaves companies’ cash flow in such a poor state that they are unable to pay their own suppliers, effectively amplifying the problem along the supply chain.

According to recent figures from accountancy software provider Sage UK, 54% of UK businesses think the Prompt Payment Code has been ineffectual.

A further 41% of those surveyed admitted that they had never even heard of the voluntary scheme.

Lee Perkins, managing director of Sage UK, said: “British businesses have given a damning verdict for the Prompt Payment Code, which has proved toothless and ineffective.

“There has been plenty of rhetoric, but not enough action – and firms are saying they are fed up.”

In some cases, late payment may be contributing towards the risk of corporate insolvency.

For instance, 44% of businesses have experienced cash flow difficulties because of late payments, leading 14% to withhold payment from their own suppliers, and 2.5% to withhold staff wages too.