House of Fraser has this week become embroiled in an embarrassing row with its suppliers over new payment terms which could see the government’s late-payment legislation tested in the courts for the first time.
In a move which could see the retail giant taking Rentokil Initial’s mantle as the most infamous example of bad payment practice, the company has attempted to extend its terms to 75 days.
This is more than twice the length recommended by last year’s Late Payment Act, and according to one supplier, more than double the existing payment time. It is also longer than the 60-day period enforced by Rentokil which led to calls for its chief executive, Sir Clive Thompson, to resign as president of the CBI.
In a circular to suppliers earlier this month, David Adams, House of Fraser finance director, told suppliers it would introduce new payment terms of 75 days at 3% interest from July. The Act allows small companies to charge 8% above base rate on bills unpaid after 30 days, unless prior agreement has been reached.
Adams said the revised terms were part of a revamp of payment procedures which included a potentially confusing variety of terms. But this justification was angrily rejected by one supplier which claimed to have a long-standing agreement of 30 days.
Alan Toms, group finance director of J Floris, a perfumery manufacturer and retailer, said the terms broke UK contract law. He said he was taking legal advice over whether the move broke late-payment laws.
‘They are not able to unilaterally change their payment terms,’ he said.
‘We can turn round and say we won’t accept them.’ Toms added that he had written to House of Fraser but had not received a response.
A Federation of Small Businesses spokesman said the retailer’s payment policy went against the spirit of late-payment legislation and warned it could face a wave of legal challenges from other suppliers.
House of Fraser owns Dickens and Jones, Army & Navy Stores and DH Evans.
A department of trade and industry spokesman stressed that companies needed to negotiate their payment guidelines, rather than impose terms on suppliers.
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