Rolls-Royce’s Commitment to Prompt Payment of UK Suppliers

Rolls-Royce 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.

This non-compliance assessment is disappointing as we are demonstrably committed to the fair and appropriate treatment of all our suppliers. We look 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.

We make well over 500,000 payments to suppliers every year and adopt a flexible approach which matches payment terms to the requirements and capabilities of our suppliers. Firstly, we differentiate between our smaller suppliers, whose interests the Code champions, and our 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 our many smaller suppliers around the world. Secondly, we consider the option of early payment to suppliers who are facing financial constraint. Thirdly, we offer supply chain financing, at attractive rates, which enables our suppliers to receive their payment sooner if they wish.

This approach, together with our commitment to shorter payment terms for smaller suppliers, was sufficient for us to meet the criteria when we signed up to the Code in 2012, and were re-confirmed in 2016. Nothing has fundamentally changed in our approach since then – as a group we pay around 90% of our invoices on time. 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.

1. Rolls-Royce pioneers cutting-edge technologies that deliver clean, safe and competitive solutions to meet our planet’s vital power needs.
2. Rolls-Royce has customers in more than 150 countries, comprising more than 400 airlines and leasing customers, 160 armed forces, 70 navies, and more than 5,000 power and nuclear customers.
3. Annual underlying revenue was £15 billion in 2018, around half of which came from the provision of aftermarket services.
4. In 2018, Rolls-Royce invested £1.4 billion on research and development. We also support a global network of 29 University Technology Centres, which position Rolls-Royce engineers at the forefront of scientific research.
5. The Group has a strong commitment to apprentice and graduate recruitment and to further developing employee skills.