Paul Reeve, director of business services at the Electrical Contractors’ Association (ECA), has called on the Government to make solving late payment a key priority when Parliament returns from the summer recess.
“This is an issue which has dogged UK businesses – and in particular the construction supply chain – for far too long,” he said. “At best late payment forces business owners to delay investing in their firms, and at worst it can send a company into administration. Government needs to make tackling it a key priority, and to bring in legislation which stamps the practice out.”
Reeve’s comments came after responses to a BIS Consultation (published in June 2015) revealed just how much of an issue late payment was for SMEs. Ninety-three percent of respondents to the Challenging Grossly Unfair Payment Terms and Practices Consultation, who were SMEs or represented SMEs, clearly stated that late payment and unfair terms were an issue for them or their members.
He continued: “A number of voluntary codes and charters have been developed and launched in recent years in an attempt to tackle this issue, but they don’t show evidence that they actually work. It’s time the Government took the next logical step and introduced legislation to require under 30 day payment between commercial firms – and with increasing sanctions if this does not happen. For example, anyone who fails to pay their supply chain within 30 days – now the legal norm in the public sector supply chain – should expect to be on the fast road to a ban from tendering for public sector work for at least one year. This would encourage businesses to pay all their subcontractors promptly and fairly.”
Another solution, according to Reeve, would be to create a Public Sector Ombudsmen to deal with payment issues for SMEs, which would remove the need for them to go to court.
“In our experience, SMEs are unwilling to go to court on payment issues because of the cost and because they worry about the impact on their ability to win work in the future,” he said. “Setting up a Public Sector Ombudsman would remove the need to go to law, and provide a means of addressing ‘grossly unfair’ payment terms before they set in and cause real damage to a business.”
He concluded: “We appreciate what the previous administration has done so far in this area, but unfortunately there are still too many loopholes for poor payers to exploit. We’re ready and willing to work with the Government to find a workable solution to payment abuse.”