Industry bodies are calling for urgent action to avoid a repeat of the Carillion crisis, pointing out that previous schemes by the Government were ineffectual.
The construction giant was ironically, or hypocritically, a signatory of the prompt payment code set up to tackle late payment.
This had clearly little affect as Carillion’s notoriety as a late payer soon spread.
According to the Federation of Small Businesses (FSB) some suppliers had to wait four months or longer for bills to be settled with Carillion. This is in direct conflict with the rules set out in the ‘voluntary code’ which insist bills be paid within 60 days.
Mike Cherry, national chairman of the federation, urges for a new “three strikes and you’re out” rule that would expel companies that repeatedly paid suppliers late.
Philip King, chief executive of the Chartered Institute of Credit Management, challenges this rule proposed by the FSB, claiming the real problem lies in the reluctance of smaller businesses to speak out against the bigger companies.
“We need businesses to be more willing to challenge the behaviour of buyers both directly and through the prompt payment code, so that the change in culture we all know is needed can be achieved”, he added.
According to the federation, late payment forces about 50,000 business to the wall every year and costs the economy an estimated £2.5 billion. Small companies are forced to take out expensive short-term credit to plug gaps in their cash flow, ultimately restricting growth and potentially driving up prices.
Rudi Klein, chief executive of the Specialist Engineering Contractors’ Group further demands protection for “retention” money, the cash withheld from suppliers in the case of repairs. “Carillion has to be a game-changer for improving payment security,” Mr Klein said.
Late payers are continuing to devastate businesses across the country. The government continues to attempt schemes to combat it, and they continue to fall flat. Now that the construction giant Carillion has collapsed on Government’s doorstep, the public demands a shake-up. A shake-up to how small businesses are protected in moments of crisis, and a shake-up to how late paying blue-chip companies are penalized. The Credit Protection Association has brought many businesses back from the brink of insolvency, usually as a result of late and non-payers. We do not only strip our members of bad payers, but also advise them on how to avoid them in the first place. Late payers are not the grim reapers and can be thwarted. Please get in contact with CPA for more info or to see how we can help!