MPs push for statutory 30-day payment

A group of MPs has urged the government to adopt a statutory requirement for companies to pay invoices within 30 days, declaring they were “shocked” by the extent of late payment.

In the newly published Small business and productivity report, the Business, Energy and Industrial Strategy (BEIS) Commons select committee also called for the Small Business Commissioner to be given the power to fine companies who pay late.

And it proposed extending the Commissioner’s role to cover the construction industry, which it described as a “sector where poor payment practices are rife”, as well as introducing independently managed project accounts with money withheld as a retention “only when there is a good reason to do so”.

The BEIS Committee argued that it was crucial for small- and medium-sized enterprises (SMEs) to be paid fairly and on time in order for them to succeed, but that the government’s Prompt Payment Code had so far proven to be ineffective.

And it warned that the government was on course to miss its target of awarding 33% of all central government targets to SMEs by 2022, despite the fact that it saw access to public sector procurement as an important benefit to SMEs.

Rachel Reeves, chair of the BEIS Committee said: "Small and medium-sized businesses are vital to the health of our economy, providing jobs and prosperity to communities up and down the country. But many SMEs are placed in a stranglehold by larger companies deliberately paying late and ruthlessly taking advantage of their suppliers, causing these firms financial instability. Unless the government levels the playing field and acts to bring in a tougher regime for poor payment practices then we choke off the opportunity for SMEs to invest and grow in the future.

"UK productivity is falling behind its competitors and it’s important the government’s Industrial Strategy supports the ‘long tail’ of less productive SMEs to benefit from new technologies and skills. Small and medium-sized businesses have an important role to play in rebalancing the UK economy and spread prosperity more widely and to all parts of the country. The government must play its part and, at the very least, ensure that more SMEs are awarded government contracts, which are paid fairly and on time."

Electrical Contractors’ Association (ECA) deputy director of business, and SME business adviser to the Cabinet Office Rob Driscoll said: “This is a significant milestone. Government is now setting the tone for acceptable supply chain payment behaviour and realising its role as a leading and responsible client in the post-Carillion era.”

Meanwhile, a total of 270 MPs have expressed their support for the Aldous Bill, introduced by MP Peter Aldous in the wake of Carillion’s collapse at the start of this year.

The Private Members’ Bill proposes that cash retentions can still be deducted as a security but must be deposited into a retention deposits scheme. A second reading of the bill, introduced on 9 January, has been delayed several times.