Government told to pay up

Posted on 1 Feb 2010 by The Manufacturer

The Federation of Small Businesses has condemned government’s record of paying its suppliers on time after revealing the public sector is late with one out of three of its invoices for small companies.

The FSB says Whitehall has failed to deliver on a commitment it made two years ago to pay for goods and services within 10 days of request. The organisation accused the government of hypocrisy in setting up the voluntary Prompt Payment Code last year but not ensuring that it or its agencies adhere to it.

The FSB surveyed almost 10,000 companies for its annual ‘Voice of Small Business’ report and found that UK central Government (31%), Government agencies (30%), EU institutions (30%), the NHS (29%) and local authorities (25%) are all consistently late with payments. The private sector is late 34% of the time.

“It is shocking that after the Government put the Prompt Payment Code in place so many businesses are still being paid late,” said John Wright, national chairman of the FSB. “The public sector needs to take the lead in more than word alone and set an example that paying late isn’t acceptable, as this problem persists in the private sector.”

The FSB is calling for tough measures to be taken on the issue of late payments. It wants the introduction of a ‘Social Clause’ in all Government contracts which would guarantee not only that Government itself pays on time but that lead suppliers in government contracts pass on payments through the supply chain on time.

“Any business found to persistently breach the terms should be fined and be warned they may lose contracts in the future,” added Wright. “This will give small businesses confidence and go far to change the poor record of behaviour on this issue. Late payment is not a new issue, but it has been a particular problem in the past year and it is more important than ever that this worrying practice is brought to an end.”

Other findings in the ‘Voice of Small Business’ report include:

• 28 per cent of members surveyed believe the business environment will improve in the next 12 months;

• Only 13 per cent of members who have borrowed in the last year believed that interest rates on new lending had decreased despite the base rate being at an all time low’

• 53 per cent have introduced new or improved products or services in the last 12 months and a similar proportion (51%) believe they will do in the next 12 months;

• 34 per cent believe that a cut in business rates would help to improve the economic prospects of the business with 31 per cent citing a cut in employers’ national insurance contributions.