In his Spring Statement, chancellor Philip Hammond pledged to tackle the late payment epidemic. His announcement followed research from the Federation of Small Businesses (FSB), which claimed 50,000 companies died a year as a direct concequence of late payments.
Part of the government’s efforts include investigating whether larger companies bully small suppliers, especially after the Carillion incident. As Real Business columnist Charlie Mullins suggested at the time: “The demise of Carillion revealed the cataclysmic effect the collapse of such a large company can have on the economy.
“The workers it employed along with contracts it will fail to service, are the considerable number of SMEs up and down the country that made up its supply chain.”
That larger companies are still embroiled with late payments is an issue Creditsafe sought to highlight. More specifically, it turned to the world of Formula 1 to coincide with the sport’s season start. Using sourced data, it ranked Formula 1 teams based on the percentage of invoices paid on time and the number of days beyond terms it usually took to pay suppliers.
It found that Formula 1 teams pay 16 per cent of invoices later than agreed, despite having a combined turnover of £36bn.
Red Bull, with a turnover of close to £200m, was the worst offender. It paid 31 per cent of its invoices to suppliers late by as many as 16 days. In comparison, McLaren was the most prompt payer of the group, with 93 per cent of its invoices paid on time.
What was intriguing, Creditsafe explained, was that Red Bull had found much success, while McLaren’s multiple engine failures ended up affecting team performance.
“In recent years we have seen the emergence of a late payment culture in the UK,” said Rachel Mainwaring, COO of Creditsafe. “Even in Formula 1, with the huge amount of money that is available to teams, late payment is rife and noticeably, none of the teams pay on time.
“Late payments can be a huge problem for businesses, whether dealing with the huge sums of money in F1, or smaller amounts of daily business expenses. It can leave companies with a potentially dangerous financial shortfall and all businesses, particularly those at the top of the podium should be fulfilling obligations to suppliers.
“However, it is interesting to see the lower performing teams, such as McLaren and Torro Rosso, are beating out competitors when it comes to prompt payment. There’s no doubt that if McLaren’s reliability last season had been as good as its prompt payment rate, Fernando Alonso would have been a happier driver!”
Creditsafe’s Prompt Payment Formula 1 Standings. Red Bull isn’t included on the list.
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