A June article published in Economia magazine from the ICAEW (Institute of Chartered Accountants in England and Wales) has questioned what can be done to resolve the issue- if anything.
Paul Uppal’s appointment as small business commissioner was seen to be a step in the right direction, a demonstration of solidarity to the small business community. Unfortunately, less than a month after Mr Uppal started the job, Carillion collapsed. The construction giant’s demise left behind billions of pounds of debt, leaving small construction companies desolate and without any hope of repayments. ICAEW executive, Rachel Wilcox, who penned the article, describes the fallout as a “baptism of fire” for Uppal, with immense pressure being directed at the small business commissioner, as well as the rest of the UK government.
The subsequent scrutiny of Carillion’s payment history further challenged the government’s assessment of credit risk, in relation to businesses they granted contracts to. Not only could it be readily seen that the company had for some time been taking 120 days to pay its suppliers, but hypocritically Carillion was also a signatory for the government’s Prompt Payment Code; an initiative promoted as bringing an end to late payments. Its voluntary make-up however ultimately brought the code limited success, with late paid businesses too intimidated to confront their perpetrators.
The Chartered Institute of Credit Management (CICM) defends the code, with Philip King, the CICM chief executive, insisting that the Carillion damage merely led to a misunderstanding of how the code worked. “When we get involved, things get resolved quite quickly”, Mr King insisted. The fact that late payments persist still hitherto seems to contradict his argument, indeed many industry heads are demanding a tougher approach than waiting for self-confessed late payers to sign up!