Crackdown on government supplier late payments

Companies which fail to demonstrate prompt payment to their suppliers could be stopped from winning government contracts, under new plans unveiled to tackle late payment

The prompt payment initiative is set to come into force in autumn 2019 and is designed to ensure the government only does business with companies who pay their suppliers on time, many of which are small businesses.

For the first time, failure of companies to demonstrate prompt payment to their suppliers could result in them being prevented from winning government contracts.

Cabinet office minister Oliver Dowden said: ‘Paying invoices promptly is vital in providing healthy cash flow, particularly for smaller businesses who are the backbone of the UK economy, to help them survive and thrive.

‘From next year, if government contractors are late with supplier payments, they could stop winning public contracts altogether - until they clean up their act.’

The Federation of Small Businesses (FSB) said it had been pushing hard for this reform and welcomed the government’s announcement.

Martin McTague, FSB policy and advocacy chairman, said: ‘This sends a clear message from government that paying late is not okay.

‘Cracking down on big businesses supplying to government, and not paying on time, is a win for small businesses, tax payers, the wider economy and public services.

‘We will continue to work with the government on this and further measures to drive out late payment from government supply chains once and for all.’

James Roberts, political director of the TaxPayers’ Alliance, said: ‘Getting involved in public procurement is a tough gig for small firms. In the past, bigger contractors have dragged their feet when paying smaller suppliers, causing them cash flow problems and leaving SMEs hesitant to take the work.

‘These proposals finally do something about that.

‘Making the process more small business friendly delivers the double whammy of driving down costs and supporting enterprise. Taxpayers should welcome these changes, which will ultimately mean more competition, lower costs and better services.’

The government has also announced it will update its supplier complaints service to ensure business voices are heard.

Formerly called Mystery Shopper, the free and anonymous complaints service - now called the Public Procurement Review Service - helps suppliers of all sizes raise complaints and concerns about procurements they are involved in or about the conduct of contracting authorities.

Report by Pat Sweet

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