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Progress on poor payment practices

ECA has long campaigned to improve payment practices for small businesses in the electrotechnical and engineering services industry.

Our view is that, if Government integrated its existing initiatives promoting transparency, opportunities in procurement and digital means of enforcement, the effect on business culture would be profound.

Thanks to continued work by ECA with the Cabinet Office, Small Business Minister, Small Business Commissioner and others, an ambitious new package of measures will help to level the playing field for the UK’s 5.7 million small businesses, delivering on the modern Industrial Strategy’s ambition to make Britain the best place to start and grow a business.

To combat unfair payment practices, the Government has sought to implement several key initiatives.

These include:

• Legislating for interest on late payments

• The Construction Act

• Public Contracts Regulations

• Payment reporting

• Setting up the office of Small Business Commissioner

• Public Procurement Review Service

• Prompt Payment Code

• Construction Supply Chain Payment Charter

• Project Bank Accounts

• Supply chain finance

Linking payment performance to procurement opportunities

We have made our policy positions on prompt payment abundantly clear through our responses to many consultations, meetings and engagements with the Cabinet Office, the Minister for Small Business, the Small Business Commissioner, and engagements with the Industrial Strategy and Sector Deal.

That said, in recent months ECA has welcomed some encouraging developments, namely:

  • The announcement from Oliver Dowden in November 2018 of a new policy which will require bidders to answer a series of questions about their supply chain management and tracking systems in order to remain eligible for public sector opportunities
  • Companies House adding a warning to its website that the information available on its site has not been independently verified. This is aimed at combatting short-term fraud, where companies file deliberately false accounts and use credit to fraudulently obtain goods that are delivered to third-party addresses
  • The Small Business Commissioner Paul Uppal being appointed to the Prompt Payment Code Compliance Board in order to strengthen its monitoring and enforcement regime
  • Action on companies who fail to meet the standard of the Prompt Payment Code (PPC). This has so far seen 34 companies removed or suspended from the Prompt Payment Code during the past quarter

Creating a Responsible Payment Culture

In her response to the consultation, Minister for Small Businesses Kelly Tolhurst announced several further measures.

These include:

  • The establishment of a minister-led group to bring together key Government Departments and act on improving prompt payment across both the public and private sectors
  • Government will work with UK Finance and the financial sector to review the role supply chain finance plays in fair and prompt payment, including the potential for an industry-led standard for good practice
  • Company boards will now be held accountable for payment practices to small businesses in an effort to increase transparency and accountability
  • The Government will consult on strengthening the powers of the Small Business Commissioner. New powers could include the ability to impose financial penalties or binding payment plans on large businesses found to have unfair payment practices
  • Responsibility for the Prompt Payment Code will be moved to the Small Business Commissioner. This will put all tools to tackle late payment under one organisation
  • Tough new legislation that allows for the prosecution of companies which do not fulfil their Payment Practices Reporting duty. The government will consult on giving these powers to the Small Business Commissioner
  • A Business Basics Fund to encourage businesses to use technology to simplify invoicing, payment and credit management

Ending the culture of late payment will boost SME productivity, break down barriers to growth and improve cash flow. By concentrating our collective efforts as government, industry and trade bodies united behind the above measures, the UK could become one of the most exciting places to do business – surely a positive outcome for all.