GSK reinstated to the Prompt Payment Code

GlaxoSmithKline (GSK) has been reinstated to the Prompt Payment Code after meeting the more demanding requirements of the reformed Code.

Two entities of GlaxoSmithKline (GSK) – GlaxoSmithKline Consumer Healthcare (UK) Trading Limited and GlaxoSmithKline UK Limited, were suspended from the Code on 1 November 2019, after their payment reports from January – June 2019 failed to meet the requirement (as they were then) to pay 90% of suppliers in 60 days.

Reports highlighted that GlaxoSmithKline Consumer Healthcare (UK) Trading Limited, were paying 28% of suppliers within 60 days. GlaxoSmithKline UK Limited were paying only12% of suppliers within 60 days.

Since then, the company has drastically overhauled its payment practices and is now paying more than 95% of its suppliers within 60 days and moreover, all its UK based SME suppliers are paid on average within 18 days.

Liz Barclay, Small Business Commissioner said “In January, we announced the relaunch of the strengthened Prompt Payment Code. The new Code requirement that 95% of invoices for the smallest businesses are paid within 30 days will help to ensure the smallest businesses maintain good cash flow and can continue to grow as part of the Build Back Better agenda.”

“It’s encouraging to see that GlaxoSmithKline (GSK) recognises the value of being a signatory to the Code, and as a result have put in the hard work to improve their payment practices.”

“Since the Small Business Commissioner took on administration of the Code in March 2020, we have seen more than 1126 new signatories. I urge all businesses to demonstrate their commitment to ethical payment practices and become signatories to the Code”.

Mike Cherry, National Chairman at FSB said “Having more big corporates adhering to the Prompt Payment Code will be fundamental to our economic recovery in the months ahead. The UK’s poor payment culture was destroying thousands of firms every year before the pandemic hit, and covid-linked disruption has made matters worse.”

“It’s great to see the new Small Business Commissioner hitting the ground running. We look forward to working collaboratively to help more companies understand that, far from being savvy, poor payment serves only to instil stress into supply chains and stifle competitiveness.”

John Foster, Chief Campaign Director at the CBI, said “The pandemic has once again highlighted the importance of healthy supply chains. Small companies are the backbone of the UK economy yet remain most at risk from slow or late payments – particularly after months of cashflow pressure.”

“Good payment practices are vital, and more companies are making positive progress, which will strengthen business relationships and shorten the road to recovery.”

Separately it has been reported that Tesco has resigned from Prompt Payment Code. The report by The Times says the supermarket quit the scheme on 22nd June just days before the terms dropped from 60 days to 30. The move has prompted a backlash against Tesco, which in 2016 was accused by regulators of prioritising its own ‘finances over treating suppliers fairly’ from small businesses.

Tesco had claimed it was not practical for it to meet the new terms since it categorised suppliers on the volume of business it does with them, not how many staff they have andsays that the decision to leave the code was “solely to its new definition of a ‘small’ business and none of our small suppliers will be worse off as a result.” Tesco says that it categorises its suppliers based on the annual sales it makes with the company, rather than their size.

Tesco says that during the pandemic, it extended special payment terms to suppliers with which it has annual sales of less than £250,000, and has now made these special terms permanent. Under the new terms, 1400 of its 2500 suppliers are paid within five days of when their invoice clears, which it says is significantly faster than the code’s 30-day limit.

Chief of External Affairs Craig Beaumontat  the Federation of Small Business  said “Tesco’s shock decision is bad news for good corporate governance and for leadership,” adding that the industry must not go back to the bad old days.”