The Forum for Private Business, a not-for-profit business support group, is urging the Government to use the contracts as a tool to fight late payment by refusing contracts to those companies who take an unreasonable amount of time to pay invoices.
In April the Forum held a roundtable event at Westminster alongside representatives of the Government’s department of Business, Innovation and Skills (BIS), the Labour Party, the Institute of Credit Management (ICM), the Association of Certified, Chartered Accountants (ACCA) and Lloyds TSB Business to discuss late payment and the harm it does to SMEs.
New research it carried out in conjunction with the credit reference agency, Graydon UK, suggests more than half of all small businesses have been affected in some way by the practice in the last year alone, with 16 percent claiming it has nearly put them out of business. The data was presented for the first time at the meeting and was the focus of discussions.
“While we strongly support the Government’s plans to improve the public sector procurement process for the benefit of smaller private sector businesses, it would be extremely welcome if it were to ensure only those firms which pay their suppliers promptly are awarded these lucrative state contracts,” said the Forum’s senior policy advisor Phil McCabe.
“It would send a clear message to big business that late payment is not acceptable and will not be tolerated by government. This is an amazing opportunity for it to lead by example and set the standard for the private sector to follow.
“There really is the potential for massive impact here for very little effort and, after all, if government is paying primary contractors within 10 days, why should those same contractors not settle with their suppliers ASAP?
He added: “Our latest research on late payment shows clearly the impact late payment has on small business. By being a beacon of best practice and only using firms which respect the supply chain by paying their dues promptly, the Government would be demonstrating huge support for small business.
“And let’s be frank, it has much to do to show it even has even a basic understanding of the needs of small business, despite it long ago pinning any hope of economic recovery on the sector’s front door. The fact the economy has stalled and is back into recession this week goes to show the private sector is not delivering this growth, so a small gesture such as this could help kick-start the process.”