GSK puts the squeeze on suppliers with payment time increase

Pharmaceutical giant GlaxoSmithKline has been named and shamed as 'morally bankrupt' by the Forum of Private Business for increasing supplier payment times from 60 days to as much as 95.

The company, the world’s fourth-largest pharmaceutical producer, is part-way through informing its suppliers of the changes.

The action means GSK enters the FPB Hall of Shame to join the likes of Sainsbury’s, Dell, Argos and Carlsberg, which have all previously increased supplier payment times retrospectively.

Forum spokesman Robert Downes says, ‘When suppliers receive a letter like the one GSK’s suppliers are starting to receive, few have any choice but to agree to the new payment terms. There is little room for bargaining through fear they will lose the business, and no small firm wants that in the current economic climate.

‘What makes the GSK case all the worse is the sheer size and profitability of the firm – the fourth biggest pharmaceutical company on the planet. This is not a business struggling to make its way in the world. It is, however, a company concerned only with boosting its own profits whatever the cost to smaller firms, and has scant regard for the consequences of its actions.’

Downes adds that GSK only two years ago increased supplier payment terms to 60 days in a ‘relentless’ move.

‘Of course the problem is that when lesser companies see the example being set by the likes of GSK, and other household names like Sainsbury’s, then they think it’s OK to do the same.

‘It’s not, it never will be, and it’s high time big business started treating the army of small businesses who supply them with some respect. Prompt payment is not too much to ask, but can make all the difference for struggling small firms.’

A spokesperson for GFK says, ‘We greatly value the relationships with have with our many suppliers and understand the pressures on cash flow and financing being faced by smaller companies at this time. 

‘This is why, for smaller companies, we have a number of schemes in place to help them, including alternative payment schedules and offering supply chain finance. For most suppliers, the changes we have made to our payment terms will have little to no impact if they submit their invoices towards the end of the month.’

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