November 27, 2012 10.07 am This story is over

Lincoln businessman calls for a level playing field for manufacturers

China’s upper hand: Lincoln businessman calls for a level playing field for county manufacturers compared to their competition from Asia.

A decision by supermarket Sainsbury’s to extend its credit payment to UK suppliers from 30 days to 75 days for settlement of their accounts after delivery of goods combined with a Chinese manufacturer being paid 50% with order and 50% before the goods leave Chinese shores, exemplifies the arrogance and opportunism of the great and the good in our society.

Cash flow is the lifeblood of businesses and small businesses in particular but this kind of preferential treatment which favours Chinese manufacturers is damaging and in some cases killing our own manufacturers.

A supplier to a large supermarket will take an order in June from the supermarket (say Christmas baubles) and order them from China with 50% cash ‘up front’. The Chinese manufacturer fulfils the order and the second 50% of the cash is sent to China before the order leaves the docks. On arrival in the UK the supplier processes and delivers the goods to the supermarket (say September/October). 30 days, and up to 120 days later the supplier is paid for the order.

The Chinese manufacturer has produced the goods and the UK supermarket has retailed the goods all at the expense of the supplier working on UK bank money. It is a cash flow nightmare.

Is it any wonder that the Chinese have huge investments in UK and US government loan stock (gilts) earning interest on what is essentially our money, having been paid in advance for goods that the British retailer/supplier is paying interest on, at a far more exorbitant rate, before waiting what will now be 75 days from Sainsbury’s, to get paid for their endeavours.

Why is this government telling energy suppliers how much profit they should earn when their so called economic advisers do not appear to have pointed out the very basic shortcomings of business enterprise where Sainsbury’s can even think they can get away with arbitrarily moving from a 30 day to a 75 day account settlement regime, which is damaging our own home-based suppliers.

China has all the money because it demanded it in its terms of trade. British manufacturers are poorly resourced because they have contracts drawn up by ‘clever’ lawyers that allow this payment injustice to be perpetrated. It is wrong and if Mr Cameron and his government would divert their focus from the energy companies to the small business sector then they might well be able to put those clever lawyers out of business.

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Terence O’Halloran is a chartered financial planner of Lincoln-based O’Halloran Financial Management Services.