Nine out of ten public sector suppliers hit by late payments

Mike Cherry of the FSB

New research from the Federation of Small Businesses (FSB) shines a light on the poor payment practices epidemic running through public sector supply chains that is putting many small firms at risk.

FSB’s new data, which is part of wider forthcoming research into how the UK can better use supply chains, shows that nine out of ten (89%) public sector suppliers have been paid late. This is true both for suppliers to central government (88%), local government (91%) and those supplying to public infrastructure projects (91%).

While FSB has welcome important steps announced by Government to widen access to public procurement, FSB is calling for urgent action to address late payments to those small businesses who have won government contracts.

FSB wants the Government to introduce penalties for departments, agencies and public bodies who fail to pay invoices on time. Additionally, departments, agencies and public bodies should be forced to automatically pay interest on any payments made later than contract terms.

Responding to the findings, FSB National Chairman Mike Cherry, said: “Our research highlights a shocking failure in the public sector – the government needs to get a grip if we are to have a chance of stamping out the poor payments culture running rampant in the UK economy.

“It is unfair and unacceptable that so many small firms, many of which are already struggling with the high cost of doing business, are also being forced to wait for money they are owed for work completed for the public sector.

“The Government needs to lead by example and ensure that small public sector suppliers are paid promptly on completion of their work. This starts with the Government and its strategic commercial suppliers, making sure that prompt payment is embedded throughout their supply chains

“By improving public sector payment practices, the Government can bring some fairness to the public procurement process and help reduce the risk of public sector contracts for small businesses. Crucially, this would also prevent Carillon-type practices happening again. This is a win-win for everyone involved in the supply chain because when small businesses are used effectively, they are able to create jobs and growth.”