Agencies hit by payments terms in the UK, says IPA

Alex Hunter: finance director of the IPA
Alex Hunter: finance director of the IPA

The problem of "cash-rich multinationals" taking up to 120 days to pay ad agencies to improve their balance sheets has put pressure on London shops, according to the Institute of Practitioners in Advertising.

In response to a report in the Financial Times, which reported "consumer giants" were turning the screw on ad agencies in the US, Alex Hunter, the finance director of the IPA, said major agencies in London have "seen the same pressure".

Mondelez International, the owner of food brands such as Cadbury and Philadelphia cheese, is extending its payment terms to 120 days from 1 July in the US.

Procter & Gamble, the international FMCG conglomerate owner of Ariel and Gillette, announced last month it was to extend the average amount of time it takes to pay suppliers from 45 days to 75 days.

Hunter said: "It is surely nonsensical that agencies – many of whom are SMEs – should act as banker to these major corporations, merely so that these corporate giants can demonstrate strong balance sheets to their analysts each quarter.

"With interest rates at an all-time low there is no real commercial value in unilaterally extending payment terms.

"Those at the receiving end of this pressure are precisely those hired to add value to these major companies through their commercial creativity."

It is not the first time big companies have come under fire for extending the time they take to pay suppliers.

Brewer Molson Coors, the owner of Grolsch and Carling, entered The Forum of Private Business 'hall of shame’ over its supplier terms in 2010.

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