Danger sign for suppliers: when a customer changes payment terms to 90 days and beyond (as Thomas Cook did before collapse)

Picture: The Guardian

Danger sign for suppliers: when a customer changes payment terms to 90 days and beyond (as Thomas Cook did before collapse)

It all began in 2014 when Thomas Cook extended its payment terms for suppliers to 90s days. In 2019 it went bust owing suppliers £1.75 billion. It’s total liabilities to customers, banks and lenders was £9 billion. Only between £176 million and £244 million is likely to be recovered by the administrators according to the Insolvency Service who published the eye-watering figures this month.

Ian Carrotte of ICSM said the extension of the payment terms in 2014 should have been a red light to suppliers. He said: “From the window cleaner at their HQ to the fuel companies and airports, an alarm should have sounded. A similar extension was announced by Carillion when they pushed their payment terms to 120 days and even boasted about it on their website by effectively saying suppliers should have comfort in trading with such a solid company. If a company is solvent there is no reason why it cannot pay on 30 days. Yes there can be special arrangements but if a firm suddenly pushes the limit out to months then stop trading with them as there is something wrong happening.”

The Insolvency Service said that total estimated asset realisations of up to £244 million excludes the costs of realising the assets. They said: “Those realisations to date include the sale of retail outlets, aircraft landing slots, intellectual property rights, subsidiary and joint venture businesses and the collection of currency and cash from retail stores.”

Ian Carrotte said it was a classic case of a company that had borrowed and borrowed with debts of £9 billion which they could not service. He said: “Carillion owed £1.5 billion to lenders, Debenhams owed around a billion in loans and debts, Arcadia had debts of around £750 million while Liberty Steel owes around a billion or more depending on how you add up the various Gupta companies. Essentially these type of debts make a company unsustainable and although not many tears are shed when banks lose out it is always the suppliers like printers, hauliers and stationers etc, plus the staff who pay the price.”

Although this chart was published by the Government in 2018 it gives an idea of the continuing problem:

 

The 10 large UK companies that failed to pay suppliers on time
Company % Invoices not paid within agreed terms
GRAINGER & WORRALL ENGINEERING LIMITED 96
PARTS ALLIANCE GROUP LIMITED 95
GRAINGER & WORRALL MACHINING LIMITED 93
CLIPPER LOGISTICS PLC 92
ASHTEAD PLANT HIRE COMPANY LIMITED 92
W & J LINNEY LIMITED 92
TNT EXPRESS ICS LIMITED 91
BOUGHEY DISTRIBUTION LIMITED 90
MEDTRONIC LIMITED 89
SIMMONS & SIMMONS LLP 89
Source: Gov.uk 11 January 2018 

 

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For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk


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