Rolls-Royce commits to prompt payment of UK suppliers

Rolls-Royce stated that it 'understands that recent changes made to the assessment criteria for the UK Government’s Prompt Payment Code, administered by the Chartered Institute of Credit Management (CICM), have resulted in our suspension from the Code – specifically, in respect of our failure to pay at least 95% of our supplier invoices within 60 days'.

It stressed that as it is demonstrably committed to the fair and appropriate treatment of all our suppliers, it looks forward to working with CICM and the Prompt Payment Code Compliance Board to assist them in gaining a clearer understanding of the way in which we differentiate between large suppliers and smaller suppliers, who we believe merit additional assistance.

Rolls-Royce make well over 500,000 payments to suppliers every year and adopts a flexible approach which matches payment terms to the requirements and capabilities of its suppliers. First, it differentiates between its smaller suppliers – whose interests the Code champions – and its larger suppliers, applying appropriate and jointly agreed payment terms to each. A shorter preferred payment term of 30 days end of week, is available for its many smaller suppliers around the world. Second, it considers the option of early payment to suppliers who are facing financial constraint. Third, it offers supply chain financing at attractive rates, which enables its suppliers to receive their payment sooner if they wish.

This approach, together with its commitment to shorter payment terms for smaller suppliers, was sufficient for the company to meet the criteria when it signed up to the Code in 2012 and were reconfirmed in 2016.

Rolls-Royce said that nothing has fundamentally changed in its approach since then and that as a group it pays around 90% of its invoices on time.

Rolls-Royce's statement goes on to say: 'We have long-term contracts with larger suppliers where payment terms have been mutually agreed at 75 days end of week. Previously we were able to balance these against the more preferential treatment we offer smaller suppliers and remain compliant with the Code. Following a change in assessment approach, this is no longer the case. We continue to believe the way we have designed our payment terms is in keeping with the spirit of the Code. However, the significant volume of invoices we receive from our large suppliers – and the removal of the consideration of our preferential treatment for smaller suppliers – has pushed us below the compliance criteria as it is now being assessed'.