Minister Oliver Dowden has repeated a warning to major government contractors that they must pay small businesses on time or risk losing out on government contracts. The minister said that to leaders from the construction industry at an annual conference.
From September, the UK government will stop major contractors from winning public work contracts if they fail to pay 95% of all invoices within 60 days.
Dowden has written to more than 10,000 businesses to remind them that the new payment rules will come into force soon. But it seems the companies might not be ready - analysis by Building magazine found none of the country’s biggest construction firms are currently meeting the prompt payment benchmark.
Recently it was revealed that Kier Group PLC, UK’s second-biggest contractor, is taking 55 days to pay its suppliers. This is 25 days more than the 30-day requirement by the government. The outgoing finance director of Kier, Bev Dew, revealed that only a third of its invoices on public jobs are paid within 30 days, while a third are paid in more than 60 days.
Ironically, Kier is a signatory of the Prompt Payment Code. The code, which is voluntary, expects companies that sign on it to pay their invoices within 60 days, and that they pay 95% of their invoices within the period.
Signing on the code does not mean the company gets to stay on, as their payment performance needs to comply with the code. A number of companies, including big names such as Vodafone and Rolls-Royce Plc, were recently kicked out of the code.
The UK government itself has committed to paying 90% of undisputed invoices within five days. Small companies that find its payment performance unsatisfactory can report such incidents to a 'mystery shopper' service. Also, the government now requires suppliers to advertise opportunities worth more than £5 million on the Contracts Finder website.