Late payments left UK manufacturing firms £10.3bn out of pocket in 2011

Late payments left UK manufacturing firms £10.3bn out of pocket in 2011 according to direct debit organisation Bacs. The 2011 sum owing to manufacturers represents a significant rise on 2010 when £8.9bn was recorded as outstanding due to late payment. On average Bacs calculates that across manufacturers in expectation of late payments around £43,000 is outstanding for each company. In 2010 this figure was £38,00. According to a sector survey by Bacs, more than half of the UK’s manufacturing base experience late payments and 15% admit to being “very worried” about the consequences. An average of 29 days, in addition to the commonly expected 30 day payment period, are commonly added to payment periods according to Bacs. This leaves many firms waiting for two months before receiving payment for goods and services. Bacs says that the most frequent excuse businesses in the manufacturing sector give for late payment say they hear is that the hold-up is due to internal systems – 54% of those awaiting payment are told their invoice is waiting for authorisation. According to global trading organization GXS e-invoicing could solve many late payment woes. Nigel Taylor, head of e-invoicing at GXS explains: “Electronic invoicing is a key initiative to ensure invoices are paid on time. Automating the process allows for transparency and simplification, and the financial rewards of e-invoicing help to reduce processing costs from Eu17.60 to Eu6.70 – a 62% saving per invoice processed.” Mr Taylor continued: “Manufacturing companies may have work to do to remove a reputation of poor payers, in the UK at least. However, there is significant interest in the opportunity of electronic invoicing within industry groups like Odette and EDIFICE, which demonstrates that manufacturers are beginning to embrace the benefits of e-invoicing.” Mike Hutchinson, head of marketing at Bacs, says the issue of late payments is damaging to manufacturing firms which are relying on good cash flow to keep going through the fragile post-recession recovery period. “The problem of late payment is clearly getting worse for SMEs in the manufacturing sector,” he says. “We urge SMEs working in the manufacturing sector to look at what payments can be automated to help them assert more control over their cash flow, and hopefully alleviate some of that stress on the business and its owner,” Mr Hutchinson concluded. Published : 23 Feb 2012 9:36 am by Jane Gray Care of The Manufacturer

Mervyn: interest rates could go to 0% if crisis worsen

Bank of England Governor Sir Mervyn King has raised the prospect that the UK’s record-low 0.5 per cent interest rates could be cut yet further to support the ailing economy. “There is nothing in principle against cutting bank rate further if that turns out to be necessary” King told the Commons Treasury Committee. Such a move would cause further pain for savers and pensioners who are already being buffeted by low rates. The Governor also said he was “pessimistic” about the outlook for the eurozone. His economic warning came as official figures showed the Government’s deficit reduction strategy is being knocked badly off course by the double-dip recession. According to the Office for National Statistics, public sector net borrowing, excluding the costs of bailing out the banks, was £17.9bn in May, £3.9bn more than in the same month last year. The rise in borrowing was driven by a 7.3% slump in income tax receipts on the year, reflecting a rapidly weakening economy, and a 7.9% rise in government spending. The sharp deterioration came as an unpleasant surprise to City analysts who had expected public borrowing to fall to £14.8bn. Chancellor George Osborne has staked his political reputation on making deep cuts to Britain’s deficit by the end of the Parliament and has fiercely resisted calls for a “Plan B”, slowing the pace of cuts to support growth. But the Government’s target of reducing the total deficit to £92bn in the 2012-13 year is now in growing jeopardy. “Only two months into the fiscal year, it is evident that Mr Osborne is facing a major battle to meet his fiscal targets for 2012-13 and is in grave danger of losing it,” said Howard Archer of IHS Global Insight. Olann Kerrison, of foreign exchange specialists Moneycorp said: “Plan A, it would appear, is kaput. The spike in public sector borrowing is a body blow to the Chancellor and the Coalition’s handling of the economy.” City forecasters have already begun to raise their estimates of net borrowing over the present financial year. In a further blow for the Chancellor’s deficit reduction plan, the ONS revised its estimate of total public sector net borrowing in the 2011-12 financial year up from £124.4bn to £127.6bn. The ONS figures showed that Britain’s total public sector net debt rose to £1.013 trillion, equivalent to 65% of GDP. On Thursday the ONS is due to release its third estimate of GDP in the first quarter of the year and is expected to confirm that output fell by 0.3% over the three months, pushing Britain into its first double dip recession since the 1970s. Courtesy of London Evening Standard