Late payment is widespread across the entire public sector and is putting many small businesses at risk, according to new research.
A study by the Federation of Small Businesses (FSB) reveals that 89% of public sector suppliers have been paid late. This is true both for suppliers to central Government (88%), local Government (91%) and for suppliers to public infrastructure projects (91%).
The Government has recently introduced new measures to improve access to public sector contracts for small firms. FSB has welcomed these changes but it is now calling for urgent action to address late payments to those small businesses that have won Government contracts.
FSB wants the Government to introduce penalties for departments, agencies and public bodies that fail to pay invoices on time. In addition, it says they should be made to pay interest on payments made later than contract terms.
Mike Cherry, FSB national chairman, 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 … Crucially, this would also prevent Carillon-type practices happening again."
The Forum of Private Business (FPB) says that the small business commissioner Paul Uppal needs to be given more powers to tackle late payment.
Ian Cass, managing director of the Forum, said: "I truly believe that Paul Uppal is the right man to do this job, but he needs greater investigative powers in a format small business will trust and respond to, in order to be able to find out where the problems are in terms of sectors or individual businesses, and in those instances where his directions and advice are ignored be given the ability to apply penalties. While a business like Carillion is allowed to be a signatory to the prompt payment code, despite consistently ignoring it, it shows that a serious amount of intervention is needed."