Data from BACS discovered that in 2012 SMEs were owed over £36.4bn in late payments, and that this problem is getting worse in the current economic climate. During the summer an all-party inquiry reported that the government could do more to solve the problem.
An all-party inquiry into late payments was convened by Debbie Abrahams MP to investigate the issues associated with late payments to SMEs. MPs have made 11 recommendations to support small and medium sized businesses across all sectors of the economy in its final report published last week. However, it found that the construction industry was one of the ‘worst offenders’ for paying late and that small companies were ‘bullied’ by large ones.
The report suggested that the government should establish a construction code of conduct and ensure retention payments are held in a trust. The inquiry also recommended a firm’s payment record should be assessed as part of the prequalification process.
The MPs also said fair payment should be written into contracts on public sector jobs. It suggested that tier one suppliers should be paid within 14 days, tier two contractors be paid within 19 days and tier three contractors then paid within 23 days.
Steve Paul, managing director of Staffordshire-based SDP, told the inquiry how main contractors’ withheld payments totalling £1.2m had sent his separate plastering business, which he had built up over 25 years, into administration. “It’s organised crime really; they know what they are doing and they are playing with us. They hung me out to dry,” he said.
Steve Sutherland, chair of Huddersfield glazing contractor Dortech, told MPs he had been owed £500,000 from a major international corporation, comprising numerous small payments and retention payments, before reaching a settlement which still left him £192,000 out of pocket. He said because most of the payments withheld were around £5,000 the costs of adjudication made it uneconomic to fight for them. He said the contract terms were ‘onerous’ and pushed all risk down the supply chain.
Debbie Abrahams wrote: “Until top CEOs and their executive board members make a decision to act ethically in business, and treat our small and medium sized businesses fairly, this problem will persist.”
The other members of the MPs’ panel were Mike Crockart, Liberal Democrat MP for Edinburgh West; Alex Cunningham, Labour MP for Stockton North; Caroline Dineage, Conservative MP for Gosport; Rt Hon Michael Meacher, Labour MP for Oldham West and Royton; Toby Perkins, Labour MP for Chesterfield; and Robin Walker, Conservative MP for Worcester.
To view the report in full CLICK HERE