Despite the efforts by government, many inhabitants of the business landscape still remain reluctant to alter payment behaviour. It is the responsibility of every business owner to pay its suppliers on time, and it is the responsibility of local authorities to ensure this sentiment is upheld. When Carillion collapsed earlier in the year, it was the supply chain that was immediately at risk, with a multitude of suppliers left with hefty debt piles on account of the construction giant’s demise. This event has inspired caution from suppliers but has not inspired a similar sentiment in their customers.
On the six-month anniversary of Carillion’s liquidation, new information has surfaced that has revealed the minimal effort that local authorities have focused on prompt payment. Specialist construction trade body, the Electrical Contractors Association and Building Services Association, obtained Freedom of Information data concerning the powers of these local authorities. According to the data, almost half of local authorities do not have or don’t know whether they have, a built-in contractual requirement for 30-day payment.
Furthermore, nearly one in five councils also said they had no intention of building in contractual requirements for 30-day payment. This is a direct contradiction of Public Contracts Regulations 2015 that state that 30-day payment down the supply chain is mandatory, illustrating the indifferent attitude some local authorities harbour towards prompt payment. This needs to be changed, and positive payment behaviour implemented.
Late payment is particularly damaging to small businesses, the so-called backbone of the economy. If these firms are to be protected, along with our position in the post-Brexit landscape, a cultural shift needs to occur and attitudes need to be altered.
At the Credit Protection Association, many of our Members have been victims of late payment. Some business owners have been either too intimidated or idealistic and have allowed bad payers to chip away at their finances. Our CPA debt recovery service frees up cash flow and strengthens finances, awarding our Members with the tools to fight back when the authorities refuse to do so.
Rob Driscoll, Deputy Director of Business and Policy at ECA, said: “Non-compliance by the public sector with the Public Contracts Regulations is unacceptable.
“This is especially significant given the cautionary tale of the collapse of Carillion – one of the key strategic suppliers to Government – which ultimately had a wider impact on SMEs.
Alexi Ozioro, Public Affairs and Policy Manager at the BESA, said: “There has been much talk of the payment culture change needed in the industry, and public bodies need to lead by example.
Carillion collapsed into compulsory liquidation in January. It was later revealed the heavily indebted group owed suppliers tens of millions of pounds in unpaid fees and cash retentions to its supply chain.