London: The Institute of Directors has warned that the “scandal” of late payments is undermining the UK’s economic recovery. It said large businesses risked regulation by failing to pay their bills on time.

The business group, which represents 40,000 company directors, spoke in reaction to a complaint by a supplier to AB InBev that the brewing company behind Budweiser and Stella Artois was imposing payment terms of up to 120 days. The Federation of Small Businesses also held a meeting with politicians from the main parties to identify ways of stamping out what it calls “supply chain bullying”.

AB InBev said it was “reaching out to the supplier in question to understand his concerns, of which we were not previously aware”.

Heinz, the baked beans and ketchup company, said it would not comment on reports that some of its suppliers have been told that they would have to wait 97 days to be paid instead of 45. Heinz was bought two years ago by Warren Buffett, the US investor, and 3G, the US and Brazilian-based private equity firm. Jorge Paulo Lemann, 3G’s co-founder, is also the controlling shareholder in AB InBev.

Mike Cherry, national policy chairman of the FSB, criticised companies for effectively using small businesses as a source of finance. “It is genuine abuse. There is no excuse for it, particularly when interest rates have been so low for such a long time,” he said.

One supplier to AB InBev said: “We just can’t afford to do work based on waiting 120 days for payment.”

The food industry’s practices with suppliers have come under renewed scrutiny after Tesco, Britain’s biggest retailer, disclosed in September that it had overstated its profits involving supplier rebates. These were an incentive to sell more of their products or to help it fund promotions.

Premier Foods, which makes Kipling cakes and Hovis bread, set off a political storm last month after telling suppliers that they could lose their contracts unless they made cash payments. It later backed down, saying it would revert “to a more conventional type of discount negotiation”.

The BBC found in the autumn that the UK’s biggest Christmas pudding maker, 2 Sisters Food Group, asked suppliers to wait for four months before it paid them.

James Sproule, chief economist at the IoD said: “If large businesses continue to behave in this way, they are inviting regulation. Politicians are already discussing maximum payment terms and charging fines or interest for late payment. In an election year, corporate behaviour will be under intense scrutiny. Now is a good time for businesses to go beyond the letter of the law and embrace its spirit.”

Two-thirds of IoD members with fewer than 250 employees have suffered from late payments, according to research published in December.

Small and medium sized companies were owed nearly 40 billion pounds in 2014, according to data published by Bacs Payment Schemes, the direct debit company. The debt burden has grown from 18 billion pounds in 2008 and has exceeded the previous peak of 37 billion pounds in 2012.

The CBI employers’ group said long payment terms and retroactive contract changes could damage supply chain relationships. It called for better transparency about payment terms.

— Financial Times