Prompt public sector payments should be shared with all suppliers

13 July 2010

A public sector commitment to settle invoices within 10 days is not finding its way down to smaller firms who operate as part of a supplier chain, a leading business group has claimed.

The Forum of Private Business (FPB) has said that, while official figures show most central government departments pay main contractors within 10 days, some subcontractors and suppliers have been left waiting for payments for months at a time.

Matt Goodman, the FPB's head of policy, said: "For many smaller subcontractors this is the real story behind the commitment to prompt public sector payment.

"What is the point in main contractors being paid within 10 days if firms further along the supply chain have to wait considerably longer for their money? Passing on prompt public sector payment throughout the supply chain would not only help more small firms maintain a healthy cash flow, it would encourage more businesses to bid for public contracts."

Using Freedom of Information legislation, the FPB asked the MoD to provide details of payment times to suppliers.

The MoD said that it is "fully committed to paying 90 per cent of valid invoices" within 10 days and that, since March 2009, it has "consistently exceeded" the target.

The department added that main contractors' payments to subcontractors should be made "within a specific period not exceeding 30 days from receipt of a valid claim as defined by the subcontract requirements".

Mr Goodman continued: "We need to build on the work done to create Prompt Payment Code so that timely payment, in full, becomes the norm across the UK.

"The risk is that that more firms go under because they are unable to maintain any kind of cash flow because of late payment from larger companies."