Written by: Keith Tully
Reviewed: Thursday 17th January, 2019
The Federation of Small Businesses (FSB) has called on the government to do more to tackle the issue of late payments within the supply chains affecting small and medium-sized enterprises.
Big companies ought to have non-executive directors responsible for payment practices and supplier relationships, and the Prompt Payment Code should be toughened up significantly, according to the small business lobby.
Other suggested reforms include the idea that project bank accounts should be used in the context of all major public sector contracts in order to help ensure that relevant contractors get paid more promptly and on a more transparent basis.
The calls for change from the FSB come a year after the multinational facilities management and construction services giant Carillion collapsed into liquidation and left SMEs across the UK and elsewhere significantly out of pocket and, in some cases, facing insolvency as a consequence.
“The collapse of Carillion was a watershed moment that brutally exposed the shocking ways that some big businesses treat their suppliers,” commented the FSB’s national chairman Mike Cherry.
“The construction giant used its dominant position to squeeze smaller firms with late payments and unreasonable payment terms in an attempt to shore up its own precarious position. These practices did not save them and their failure has resulted in very real human consequences.”
Largely in response to the issues that emerged in the wake of Carillion’s collapse, the government recently announced plans to insist that major outsourcing companies working in the public sector create ‘living wills’ to offer much more clarity on their finances in the event of their failure.
Mr Cherry from the FSB welcomed the steps being taken by the government in tackling late payments in the public sector but has said much more needs to be done to protect supplier companies who routinely receive late payments from their larger clients.
“Recent reforms to crackdown on public sector suppliers that don’t pay on time are welcome and send a clear message that paying late is not okay,” he said in a statement. “However, more must be done to ensure private, as well as public sector, supply chains pay on time.”